Bentsen Sets Hearings on Social Security Tax : Budget: Republicans charge that the Democrats’ proposed $55-billion reduction could set off a ‘tax-cut bidding war’ between the parties.

Reserving judgment on a Democratic proposal to cut Social Security payroll taxes by $55 billion a year, Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) on Tuesday scheduled hearings on the politically tantalizing legislation in early February.

Senate Majority Leader George J. Mitchell (D-Me.) said there was growing support for the measure despite strong condemnation from President Bush and a new attack launched by House Minority Leader Robert H. Michel (R-Ill.).

One GOP opponent--Sen. John Heinz (R-Pa.)--said the legislation could touch off a “tax-cut bidding war” between Democrats and Republicans that would add to the federal budget deficit and require future tax increases to offset the reductions.

The sponsor of the tax cut, Sen. Daniel Patrick Moynihan (D-N.Y.), formally introduced the bill Tuesday as one of his colleagues, Sen. Ernest F. Hollings (D-S.C.), predicted it would receive speedy approval if it comes to a vote.

Moynihan has proposed cutting Social Security payroll taxes by as much as $600 per person to provide tax relief to the nation’s wage earners and to prevent the government from using the Social Security surplus to reduce the size of the federal deficit.

Bentsen praised Moynihan for dramatizing the rising burden of Social Security payroll deductions on low-income and middle-income Americans, but said he wanted to find out if the legislation would lead to future cuts in retirement benefits.

Bentsen said the Moynihan plan would do much “to strip the fig leaf from the budget chicanery” that allows the growing surplus in the Social Security trust fund to make the federal deficit appear smaller.

But the conservative Texan said Congress should “not necessarily” adopt the proposal before it receives answers to the many questions raised about the impact of the tax cuts on the payment of benefits in the next century.

“Basically, Sen. Moynihan has proposed a kind of fiscal surgery here,” Bentsen said. “Like any surgery, that can be dangerous. . . . I don’t know whether Sen. Moynihan’s proposal can keep Social Security and the budget healthy, but I propose to find out.”

The Finance Committee scheduled hearings for Feb. 5 and Feb. 8 on Moynihan’s legislation, which has put the Bush Administration on the defensive as the second session of the 101st Congress begins.

Democrats intend to contrast Moynihan’s plan for lowering payroll taxes on all wage earners with the President’s proposal to reduce the income tax on capital gains, which would channel most benefits to upper-income Americans.

Leading Republicans, however, pictured the New Yorker’s proposal as “tinkering” with 1983 changes in Social Security financing that were designed to assure payment of benefits to the Baby Boom generation when its members retire after the turn of the century.

Michel, in a letter to House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), whose panel has jurisdiction over the retirement program, said Moynihan’s proposed tax cut was a “dangerous adjustment which could inspire even more drastic threats to the system and ultimately bring it down.”

House Speaker Thomas S. Foley (D-Wash.) told reporters that Moynihan’s proposal underscored the fact that the Social Security surplus is being used to mask the size of the budget deficit.

“I think it’s very important for us to find a means either to see that these funds are appropriately invested and saved for the future retirement of the Social Security contributors, or in the alternative, to adjust the tax to what is necessary to provide for the current requirements,” Foley said.

Under Moynihan’s bill, the basic Social Security tax rate would be rolled back from 6.2% to 6.06%, effective last Jan. 1, on all wages up to $51,300 a year. A second reduction to 5.1% would take effect next Jan. 1 on all wages up to an adjusted ceiling estimated at $54,300.

Individual savings under the proposal would depend on the amount of income, with a maximum $600 reduction next year.