White House Fears Defeat on Social Security Tax Cut

Fearing widespread defections, the White House and Democratic leaders Wednesday urged House members to hold the line against a Republican plan that would repeal a portion of the tax on Social Security benefits.

The bill--scheduled for floor action today--would repeal a tax increase on wealthier elderly Americans approved by Congress in 1993 as part of President Clinton’s budget plan for combating a deficit. GOP leaders have long condemned the increase as unfair to seniors and dubbed it the “Gore tax” because Vice President Al Gore cast the tie-breaking vote to pass it in the Senate.

Democrats have gone toe-to-toe with Republicans over many of their tax cuts, arguing that they were tilted toward the wealthy. But they are finding it more difficult politically to oppose this measure that directly benefits Social Security recipients--albeit wealthier ones.

During a rousing speech Wednesday to the House Democratic caucus, House Minority Leader Richard A. Gephardt (D-Mo.) denounced the bill as a $110-billion gimmick and urged lawmakers to help “maintain fiscal discipline” in the face of reckless GOP spending for tax cuts.

At the same time, President Clinton attacked the GOP plan and renewed his plea that Republican leaders abandon their major tax cuts and work with him on a compromise package of spending and better-targeted tax relief. He has warned that with passage of a tax cut for married couples, a repeal of the estate and telephone tax and other measures, the Republican Congress was on course to exhaust much of the projected surplus.

“I say to Congress: stop passing tax bills you know I’ll veto,” Clinton told reporters at the White House. “Start working with us on a balanced budget that cuts taxes for middle-class families, continues to pay off the national debt and invest in America’s future.”

But House Majority Whip Tom DeLay (R-Texas) rejected the president’s plea, saying their tax cuts were essential to stopping Clinton from using most of the surplus for more Democratic spending programs. And House Ways and Means Committee Chairman Bill Archer (R-Texas) called the increased Social Security tax “another ticking time bomb” because the income thresholds for the tax are not indexed for inflation.

“Almost 10 million seniors pay the tax today and more than 20 million retirees will be hit in the near future,” Archer said in a letter to Treasury Secretary Lawrence Summers. “This tax is a clear and present danger to their retirement security.”

The 1993 law under attack by the Republicans required elderly couples earning more than $44,000 a year and single seniors earning more than $34,000 a year to pay taxes on up to 85% of their Social Security benefits. Previously, a maximum of 50% of their benefits were taxable. Proceeds from the increased tax went to the Medicare program.

The GOP plan would scale back the maximum tax exposure to 50% and use future surpluses to replace the income that would be lost to the Medicare program.