Key Democrats Back Retiree Tax Hikes : Social Security: House members tell Clinton they would favor increasing the levy on recipients with greater ability to pay.

Key House Democrats told President Clinton on Friday that they would support raising taxes on the Social Security benefits of many retirees should he include the controversial proposal in his economic package.

With the President’s final proposal rapidly taking shape in preparation for its unveiling Wednesday, other members of Congress declared their backing for an energy tax that would help pay for a short-term stimulus program and long-term deficit reduction.

A source familiar with the White House deliberations said Clinton intends to propose a broad-based tax on major forms of energy, including a national security surtax on oil, that would raise $20 billion over the next four years.

But this tax would be virtually invisible to the average American since it would be based on heat content, measured by British thermal units (BTUs), and imposed far from the retail level, the source said.

Support also was evident among House Democrats for higher taxes on cigarettes and beer as part of an overall package that would restore the nation’s economic vitality.

“People are prepared to share the pain,” said Rep. Gary L. Ackerman (D-N.Y.) “Now is a time to be bold in terms of the economic package and deficit reduction,” added Rep. Peter J. Viscloskey (D-Ind.).

The growing willingness of House Democrats to tax Social Security benefits--even if only for recipients with a comparatively greater ability to pay--marked a sharp change in attitudes on Capitol Hill, where tampering with the benefits has been thought to be politically fatal.

A tentative plan floated earlier by the Administration to suspend for a year the annual cost-of-living increase for Social Security recipients was effectively killed when Sen. Daniel Patrick Moynihan (D-N.Y.) termed it a “death wish” by the new Administration.

But, judging from the favorable comments of House Democrats at a series of closed-door White House meetings Thursday and Friday, the President now seems likely to ask Congress to raise the existing tax on Social Security benefits for individuals with incomes over $25,000 a year and couples with incomes above $32,000.

Instead of applying to 50% of the federal retirement benefits as the law now provides, Clinton would seek to tax 85% of Social Security benefits for older people above the same income levels.

Any such move was certain to be opposed by Republicans--who traditionally oppose tax increases--although they alone would be powerless to stop approval of Clinton’s proposals in the House. In the Senate, Republicans could delay or block a Clinton program through filibusters or other maneuvers.

Any Social Security tax increases were equally certain to be fought by the organized groups of older Americans who have successfully fended off other efforts to winnow their benefits. It was their clout that forced Congress to reverse itself and cancel a catastrophic-health-insurance program that would have forced elderly beneficiaries to shoulder its entire cost.

“Most of us support the idea that we’re going to have to tax Social Security benefits at a greater rate than we now do,” said Rep. Robert T. Matsui (D-Sacramento), a senior member of the House Ways and Means Committee who met with Clinton on Friday. “Any kind of tax increase--especially after the Reagan and Bush years--is going to be difficult (but) the President is going to ask all of us to make a slight sacrifice.”

In his session, Matsui added, 10 of 15 lawmakers who spoke said they would support the tax on upper income Social Security recipients if it is part of the economic package. Matsui also said that Clinton planned to make public a “burden table” showing that his economic package would be fair for all income groups.

The energy tax, which would apply to all forms of energy except solar, geothermal and renewable sources of energy, would be favored by environmentalists because it would encourage conservation. Using a BTU yardstick to impose the tax also would be more acceptable to the coal industry than a carbon tax, which also had been considered by White House advisers.

Clinton’s lengthy sessions with House Democrats were designed to let them advise him on where to cut spending, how to raise taxes and where to increase investment of government funds to keep the economy strong.

Beginning Thursday and continuing into next week, Clinton has set aside time to meet for 90 minutes or more with all of the 255 Democratic members of the House in small groups. Such consultation with his party’s rank and file on Capitol Hill is unprecedented.

But the President’s investment of time may pay handsome dividends, judging by comments of departing House members.

“You wouldn’t believe how supportive our group was,” said Rep. George E. Brown Jr. (D-Colton), chairman of the House Science Committee and a veteran lawmaker. “From a political standpoint, he (the President) is doing a very, very good job by developing rapport with members of the House.”

Times staff writers Karen Tumulty and David Lauter contributed to this story.