House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) yesterday suggested increasing taxes on benefits of upper-income Social Security recipients, as congressional leaders groped for ways to revive House-Senate negotiations on deficit reductions.
Senate Republicans, who broke off the talks Tuesday after reaching an impasse with the House over their proposal to freeze all government pensions, cautiously welcomed O'Neill's idea as a conciliatory gesture while reserving judgment on the proposal itself.
"It's a crack in the dike," Senate Majority Leader Robert J. Dole (R-Kan.) said.
"It's a prospect for consideration along with other things," said Senate Budget Committee Chairman Pete V. Domenici (R-N.M.).
Dole indicated that Senate Republicans are exploring other alternatives, including bringing state and municipal employes under Medicare and requiring states to put newly hired government workers under Social Security.
Senate Republican leaders met yesterday with budget director David A. Stockman on options for reviving the conference, with another session planned for today.
O'Neill and Dole have previously aired their ideas. But they are significant because they may become a catalyst for resolving the impasse under which the Senate is demanding some curtailment of automatic cost-of-living increases for Social Security benefits, and the House is refusing to accept any modification. Most other issues in the conference, including defense spending, are believed to be negotiable.
In his proposal, O'Neill would increase the amount of taxes that Social Security recipients with incomes above a certain level -- $25,000 for individuals and $32,000 for couples -- pay on their benefits, under a plan passed two years ago.
These upper-income beneficiaries, 8 to 9 percent of the roughly 36 million Social Security recipients, now pay taxes on 50 percent of their benefits. O'Neill would lift that to 85 percent.
O'Neill's suggestion would raise an estimated $8.5 billion over three years, and Dole's would raise $8.3 billion over the same period, for a total of $16.8 billion.
By contrast, a one-year freeze on all government pensions, as proposed by the Senate, would raise $28.3 billion, including $22 billion from Social Security.
A major question is whether O'Neill's proposal would run afoul of President Reagan's vow to veto any tax-increase legislation. Dole's could also run into similar objections in that it would raise payroll taxes for government workers brought under Medicare and Social Security.
"Clearly it [O'Neill's proposal] is not a substitute for what we've been talking about," said Domenici, a longtime advocate of steps to restrain automatic inflation increases in major benefit programs.
But Senate Republicans' demand for a reduction in inflation adjustments, already weakened by a one-vote margin on passage in that chamber, was undermined further yesterday by an assault from both parties on the floor of the House.
House Minority Whip Trent Lott (R-Miss.) expressed regret that the GOP-controlled Senate had broken off the talks and called on Domenici to abandon his push for Social Security cutbacks.
"The Senate Budget Committee chairman does not speak for House Republicans" on Social Security, Lott said in a reminder that House Republicans as well as Democrats voted against any change in Social Security inflation adjustments.
In remarks later to a reporter, Lott said, "Domenici should forget Social Security. In my opinion, it ain't gonna happen."
In a harsher vein, House Majority Leader James C. Wright Jr. (D-Tex.) called Domenici's action in suspending the conference "probably the most arbitrary action ever taken by any chairman of their party in the history of the congressional budget process," and suggested that Domenici was "acting under orders from the White House."
Domenici, angered by Wright's remarks, responded that the House shared responsibility for the breakup by refusing to compromise on Social Security. "They bear just as much responsibility for there being no conference as I do," he said.