A plan to tax half the Social Security benefits of individuals with total incomes over $12,000 a year was under consideration yesterday, as leading members of the president's Advisory Commission on Social Security continued what one called "serious and intense" negotiations on a possible compromise to save the system.
The commission, which must report to the president by Jan. 15, has failed to agree on ways to raise the $150 billion to $200 billion that both sides agree will be needed over the next seven years to keep Social Security solvent.
In general, commission Democrats would rather raise taxes than cut benefits to raise the money, while the Republicans want to cut benefits first.
For the past few days Chairman Alan Greenspan, Senate Finance Committee Chairman Robert J. Dole (R-Kan.), Sen. Daniel Patrick Moynihan (D-N.Y.), former Social Security commissioner Robert Ball and Rep. Barber B. Conable (R-N.Y.) have been meeting in search of a compromise that both the president and congressional Democrats could approve.
Without this they fear a drawn-out and possibly bloody partisan battle over the issue in this Congress.
Some members, including Greenspan, have urged the president to step in and help frame a compromise. But he was burned badly when he proposed Social Security benefit cuts last year, and at his news conference Wednesday night said he would make no further proposals until the commission reports.
Members said yesterday that a compromise might still be forthcoming.
Sen. John Heinz (R-Pa.) said through an aide that he took the president's statement to mean that he would not try to dictate to the commission, not that he would shut himself out and give no guidance through intermediaries. Several other commission members expressed the same view.
One plan said to be under discussion, according to sources, was this:
Half of Social Security benefits would become subject to the federal income tax if an individual's total income from Social Security and other sources exceeded $12,000 or possibly $15,000, or, in the case of a married couple filing a joint tax return, $18,000. These income tax proceeds would be fed back into the Social Security trust funds. Social Security benefits are exempt from income tax now.
All newly hired federal employes and all nonprofit employes would be brought into the Social Security system.
Self-employed people would have to pay Social Security taxes on their earnings equal to the amount an employer and employe combined would pay on the same amount. At present, the self-employed pay three-quarters of that figure.
The annual cost-of-living increase would be delayed three months this year, and then one further month a year for each of the next three years, for a total of six months.
There would be a reduction in benefits for those retiring early at 62. They would get 30 percent less a month than if they retired at the normal age of 65, instead of 20 percent less as now. On the other hand, there would be an increase in the "bonus" for retiring after 65. It would rise from the current 3 percent a year to 6 percent or more.
Social Security tax increases scheduled for 1985 and 1990 would be partly accelerated, so that the total tax rate in 1984 would be 7 percent instead of 6.7 percent each on employers and employes, and 7.25 in 1985 instead of 7.05 percent.
At the White House yesterday, spokesman Larry Speakes said again the president was determined not to come forward with proposals. In addition, some House Republicans urged Reagan at a White House meeting not to intervene publicly lest any proposal leave him politically vulnerable.