Senate votes down cut in Social Security payroll tax, 60-38

April 25, 1991|By Peter Osterlund | Peter Osterlund,Washington Bureau of The Sun

WASHINGTON -- The Senate, forced to choose between the sanctity of Social Security and the seductiveness of a tax cut, decisively beat back an effort to cut the Social Security payroll tax yesterday, effectively erasing the issue from this year's political calendar.

On a 60-38 vote, lawmakers rejected a plan that gradually would have rolled back the 6.2 percent Social Security payroll tax to 5.2 percent by 1996. For all intents and purposes, the Senate majority determined that it was better to maintain the tax and brave any resulting criticism than to cut the levy and risk accusations that they had jeopardized the Social Security system.

"A lot of people were nervousabout the idea," conceded Sen. Daniel Patrick Moynihan, D-N.Y., the plan's author. Mr. Moynihan said his tax-cutting initiative had been "shelved" for the rest of the year.

For the Bush administration, which had lobbied fiercely against the Moynihan initiative, yesterday's margin came as something of a surprise. Indeed, lawmakers were considered so closely divided that Vice President Dan Quayle, who is permitted to cast tie-breaking votes in the Senate, took the rare step of presiding over the chamber during the vote.

Sen. Barbara A. Mikulski, D-Md., was among 16 senators who had supported the plan last year, when it failed by six votes, but cast votes against it yesterday. Sen. Paul Sarbanes, D-Md., voted in favor of the plan both times.

The vote tally itself reflected the complex political crosscurrents surrounding the issues. After Mr. Moynihan first floated his plan at the end of 1989, many Democrats hailed it as a "Democratic tax cut" that could be used to foil Republican accusations that Democrats wanted to raise taxes. Many Republicans, meanwhile, found themselves in the uncomfortable position of opposing a tax cut that would largely benefit the middle class.

By the time yesterday's vote took place, Republican arguments -- that the tax cut would inflate the deficit by hundreds of billions of dollars and eventually jeopardize the Social Security system -- won the day. Twenty-six Democrats and 34 Republicans voted against Mr. Moynihan's plan, while 29 Democrats and nine Republicans voted for it.

Moynihan's plan, offered as an amendment to the $1.45 trillion budget for 1992, would have saved $3.37 per week this year for a worker with an annual income of $35,000. In 1996, when it would have taken full effect, the savings would have been $6.73 weekly. For a worker earning $53,400 annually, weekly savings would have amounted to $4.54 this year and $10.27 in 1996.

Employers, who match employee Social Security tax payments, would have received an identical reduction. The 1.45 percent Medicare tax would have been unaffected.

The plan would also have increased the amount of a worker's annual earnings subject to the tax from $53,400 now to $82,200 in 1996 -- compared with the $69,300 in 1996 mandated by current law.At the same time, it would have reduced federal tax collections by $5.5 billion this year and $161.9 billion through 1996.

Mr. Moynihan argued that the tax ought to be reduced since the federal government borrows from the Social Security system's growing surpluses -- reaching $70 billion in the coming year -- to help finance its regular operations. Moreover, Mr. Moynihan and his allies contended, the government's dependence on Social Security taxes enables it to avoid raising other, more progressive forms of taxes instead.

As politically appealing as the idea seemed to many Democrats, it was opposed by House Speaker Thomas S. Foley, D-Wash., and Representative Dan Rostenkowski, D-Ill., chairman of the House Ways and Means Committee.

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