O’Neill Offers 85% Tax Levy on Social Security : Speaker Calls Recipients With Outside Incomes ‘Freeloaders,’ Would Agree to Hike on Benefits

House Speaker Thomas P. (Tip) O’Neill Jr., claiming that many Social Security recipients with outside incomes are “freeloaders,” today suggested a modification of the formula for taxing benefits as a possible way to end an impasse with the Senate.

It was the first sign from House Democrats of any willingness to compromise with Senate budget negotiators on the Social Security issue.

Asked by reporters if there is any room for compromise on Social Security, O’Neill said he could support an increase in taxes on benefits for retired individuals earning more than $25,000 a year or couples earning more than $32,000 a year.

Currently, individuals and couples who fall into this category pay taxes on 50% of their Social Security benefits. O’Neill proposed raising this level to 85%.

Drawing Benefits Himself

“Those people are freeloaders, to be perfectly frank,” said O’Neill, who is himself drawing Social Security benefits in addition to his $97,900 salary as Speaker of the House.

But O’Neill said he remains adamantly opposed to any freeze in Social Security cost-of-living benefits, even if it means not having a budget this year.

The Massachusetts Democrat spoke a day after House-Senate negotiations on a compromise deficit-reduction plan collapsed in a dispute over the one-year freeze on benefit increases contained in the budget approved by the Senate and endorsed by President Reagan.

Both O’Neill and Senate Majority Leader Bob Dole (R-Kan.) today expressed hope that the budget bargaining sessions will resume and that the deadlock can be resolved.

No Sign of Acceptance

But there was no indication that Senate negotiators would accept, or even consider, O’Neill’s proposal. In the past, they have stuck firmly behind a freeze in cost-of-living increases.

O’Neill’s aides, however, characterized the offer as a serious effort to resolve the budget impasse and said it has the support of Rep. William H. Gray III (D-Pa.), the chief House negotiator.

For his part, Gray said the Democrats are also willing to compromise on defense spending. He said Democrats will meet with Senate negotiators “any time” and declared that “the American people are the ultimate losers if there is no budget.”

Gray, addressing the Democratic National Committee, also charged that a new report by the Congressional Budget Office projects that Reagan’s tax overhaul plan would cost the government nearly $30 billion a year through the 1980s.

‘$30-Billion Revenue Loss’

“According to a CBO report I received this morning,” he said, the plan would produce “a revenue loss of upwards of $30 billion in the short term and in the long term of $20 billion a year in the 1990s.”