The House Ways and Means Committee last night approved key provisions of a $165 billion Social Security rescue bill that would delay this year's cost-of-living benefit increase for six months, increase the Social Security tax next year and make new federal employes part of the Social Security system.
The bill would also tax part of the benefits of higher-income retirees.
An effort by Rep. Andrew Jacobs Jr. (D-Ind.) to strike out the provision covering new federal employes and pump general Treasury revenues into the Social Security trust fund instead was defeated by voice vote.
The bill would close the entire long-range deficit, estimated at 2.09 percent of taxable payroll, the last third by reducing basic benefits slightly for future retirees. That would be done through a formula change to be phased in from the year 2000 to 2008 and by raising the Social Security tax by 0.24 percent on employers and employes in the year 2015. The tax rate, now 6.7 percent, is scheduled to rise to 7.65 percent by 1990.
Republicans withdrew an amendment that instead would have gradually raised the basic retirement age to 67 after committee chairman Dan Rostenkowski (D-Ill.) pledged that the rule for governing floor debate would allow a floor vote on such a proposal. Social Security subcommittee Chairman J.J. Pickle (D-Tex.) said he would offer it himself.
Rostenkowski said House leaders also would allow a vote on using only taxes to solve the last one-third of the long-term problem, as favored by Rules Committee Chairman Claude Pepper (D-Fla.).
Before approving coverage for new federal employes, the committee adopted an amendment by Rep. W. Henson Moore (R-La.) also to include in Social Security all sitting federal judges and all political and executive level appointees to federal jobs, even if they are already employed by the federal government. Ordinary employes would be covered only if they enter federal service after this year.
The major provisions of the rescue plan were recommended by a presidential advisory commission earlier this year and endorsed by President Reagan and House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.).
The Ways and Means Committee stuck closely to the commission recommendations, but made several changes. The commission originally had proposed taxing half the Social Security benefits of retirees whose income from other sources was $20,000 in the case of an individual or $25,000 in the case of a married couple filing jointly.
A Ways and Means subcommittee had raised these limits to $24,500 and $31,500 with a special phase-in mechanism, and the full committee yesterday, on an amendment by Rep. Richard A. Gephardt (D-Mo.), raised the cutoffs still more to $25,000 and $32,000, also with a phase-in.
In another change, the committee gave self-employed persons, whose Social Security taxes will rise under the bill, a tax credit instead of a deduction to help offset the increase.
It also voted to remove Social Security from the unified federal budget to isolate it from federal budget pressures, as the commission had recommended.
In the past, cost-of-living increases have come July 1. The bill would defer this to Jan. 1 for this and all future years. On taxes, it would speed up rate increases already scheduled for later in the 1980s, so the employe tax rate in 1984 would be 7 percent rather than 6.7 percent.