1. The present limitation of unemployment-compensation obligations to employers of eight or more people is considered reasonable in that it will apply principally to concerns where there is established longtime employment.

2. Present application to concerns with eight or more employees excludes most of the temporary, seasonal, and variable employment that would load the compensation rolls with many of doubtful qualifications.

3. The small partnerships and individually owned businesses involved where there are less than eight employees would suffer a magnified burden.

4. The act would impose another restriction on which there is no freedom of choice.

5. There is no evidence to date that the system is actuarially sound and this group would seem to impose an unwarranted tax burden.

6. The entire background of guaranteed unemployment compensation with no merit requirements and with no privilege of approval is undesirable in a democracy; is primarily an attribute of totalitarianism.

For at least the above reasons, it is recommended the Committee on Ways and Means report unfavorably on the portions of H. R. 8857 that extend coverage to any person paying wages during the taxable year.

Yours very truly,

W. H. JACOBS, Secretary.

Hon. DANIEL A. REED,

MISSISSIPPI EMPLOYMENT SECURITY COMMISSION,
Jackson, May 10, 1954.

Chairman, House Committee on Ways and Means,
House Office Building, Washington, D. C.

DEAR MR. REED: We have very carefully considered H. R. 8857, now pending before your committee, and which has for its purposes the extension and improvement of the unemployment-compensation program.

We should like to briefly comment upon the proposed amendment to section 1602 (a) of the Internal Revenue Code, as contained in section 3 of the pending act.

We urge that the second paragraph of section 3 of H. R. 8857 be amended by adding thereto the following:

"except that, irrespective of their experience with respect to unemployment or other factors bearing a direct relation to unemployment risk, such persons may, provided they have been subject to the statute 1 year or more, be permitted, for either of the first 3 years of coverage thereafter, a reduced rate of contributions of not less than the average rate assigned to all persons for the preceding year."

We are in thorough accord with the purpose of the act to permit the reduction of the qualifying period for modified contribution-rate purposes under State unemployment-compensation laws. However, if H. R. 8857 should be enacted in its present form those States having annual payroll variation plans for determining modified-contribution rates would be in a serious dilemma. In Mississippi, a payroll-variation State, rates are determined upon the basis of annual percentage declines. A change to a quarterly percentage-decline basis would be unsound and inimical to the public interest. And yet, this would be the result if Mississippi should decide to so amend its law as to accord the reduced qualifying period under the amendment proposed in section 3 of H. R. 8857.

Our suggested language, quoted above (or similar language carrying the same idea) that might be added to section 3 would, in our opinion, solve the problem faced by the payroll-variation States in event of the enactment of H. R. 8857. Certainly, it could not possibly affect adversely other modified rate plans in the laws of other States; it would be purely enabling, or permissive, for the States to take, or leave, as they might decide.

Trusting that this matter may receive the earnest consideration of you, as the author of H. R. 8857, and of your committee, I am,

Cordially yours,

ROBERT PRISOCK,

Executive Director.

COMMERCE AND INDUSTRY ASSOCIATION OF NEW YORK, INC., New York, N. Y., June 10, 1954. Subject: H. R. 6539 (Mason, Republican, Illinois); H. R. 6537 (Forand, Democrat, Rhode Island); H. R. 7054 (Dingell, Democrat, Michigan); and H. R. 8585 (Baker, Republican, Tennessee); and H. R. 8857 (Reed, Republican, New York).

Hon. DANIEL A. REED,

Chairman, Committee on Ways and Means,

House Office Building, Washington 25, D. C.

DEAR CHAIRMAN REED: The Commerce and Industry Association of New York, Inc., appreciates this opportunity to present to the House Ways and Means Committee its views on the subject bills. This association comprises some 3,500 firms which are both metropolitan and cosmopolitan; national and international, and representative of all types of industry and sizes of employers. Our views are as follows:

H. R. 6539 (Mason, Republican, Illinois); H. R. 6537 (Forand, Democrat, Rhode Island); H. R. 7054 (Dingell, Democrat, Michigan)

In an appearance before a House Ways and Means subcommittee on July 20, 1951, our association stated that it did not take any position either in support of or in opposition to extension of unemployment-insurance benefits to Federal employees. We restate that position at this time. If unemployment-insurance benefits are to be extended to Federal employees, we offer the following suggestions:

(a) Benefits should be paid in accordance with the provisions of the various State laws.

(b) Benefits should not be of uniform duration or amount.

(c) Federal annual and sick leave policies should be reviewed so as to place them in line with programs in private industry with the hope that savings resulting from more rational annual and sick leave programs for Federal employees would be substantial enough to cover the cost of providing unemployment insurance benefits to such employees.

(d) Extension of coverage to Federal employees should not in any way permit the Secretary of Labor to abrogate the present responsibilities of State agencies over the administration of unemployment-insurance systems within their domain. H. R. 8585 (Baker, Republican, Tennessee)

The Commerce and Industry Association is opposed to this bill. It is a variation of comparable bills introduced in the past when certain unemployment is imputed to be the result of particular economic trends for which the Federal Government is claimed to be responsible. Not only does this bill establish a national standard but the passage of one bill such as this opens the door for placing the blame of all economic ills on the Federal Government and can only lead to a demand for remedial legislation whenever signs of unemployment, however slight, appear in any industry or at any location in the country. As the utilization of oil and gas leads to unemployment in the coal fields, as progress in television causes unemployment in the entertainment field, should special unemployment insurance benefits be legislated in those fields. We believe the result of such legislation would be chaos in the unemployment insurance field. Furthermore, we offer the thought that in administering legislation of this nature it would be next to impossible to establish a casual relationship between the economic ill and the existence of particular unemployment.

H. R. 8857 (Reed, Republican, New York)

Extension of coverage.-The Commerce and Industry Association believes that any legislation enacted on the Federal level, intended to encourage States to extend coverage to one or more, should provide for extension of coverage through a gradual process. We do not believe that it is administratively sound nor economically feasible to impose the Federal unemployment-insurance tax on employers of one or more. At the worst extreme, we do not believe that the limitation should apply to employers of one or more at any time. There must be attached to this requirement either an amount of wages or a duration of employment test. Is it necessary for any Federal legislation whatever to encourage States to liberalize their unemployment-insurance coverage? We think not.

Federal policy should permit States to develop coverage provisions based on their individual needs. States not having a large proportion of individuals attached to the commercial and industrial labor forces should not be forced into

unsound or unwanted extension of coverage merely to achieve national uniformity. The fact that the States are well able to handle this problem of coverage for themselves is well indicated by the fact that 26 States presently have more liberal coverage provisions than those set out in the Federal unemployment-insurance program.

States are more alive to local conditions and their legislatures act more quickly if effecting necessary amendments than does the Federal Government. This is evidenced by the fact that all of the State unemployment-insurance programs have been liberalized and expanded substantially over the years while the Federal unemployment act has undergone little change.

The unemployment compensation program is essentially a State program. It is true that in the beginning it was necessary to bring the Federal Government into the picture. The Federal unemployment tax was passed in order to stimulate the States to pass unemployment-compensation legislation. States had been afraid to establish such a program because of the belief that their native businesses would suffer a tentative disadvantage unless neighboring States passed similar legislation. Now that all States have adopted and have liberalized their unemployment-insurance programs this problem no longer exists.

Furthermore, it should be emphasized that while we have had unemploymentinsurance programs in force for some twenty-odd years, little has been done and much remains to be done in the way of educating the employers in this country as to the need for and the benefit of these programs. To extend Federal coverage

to 800,000 additional employers of some 3.4 million workers without first encouraging the education of such employers would appear to jeopardize the experience rating provisions of the various State laws.

We recognize that many groups are continually campaigning to discredit experience ratings and to substitute flat-rate taxation upon all employers. The objective of such a flat-rate tax is to remove the incentive for employer interest and cooperation in the program. We submit that unemployment insurance minus employer interest and cooperation is reduced to the status of a Federal dole.

Reduced rates for employers with only 1 year's experience.-The Commerce and Industry Association favors the provision for experience rating for employers with only 1 year's experience. Under this legislation responsibility is left with the States to determine whether their experience-rating formulas should be amended in a way so as to grant to employers in the State the benefit of the 1-year limitation. Elimination of quarterly payments.-The Commerce and Industry Association strongly opposes the elimination of quarterly payments. This would appear to be merely one more step in the general attempt to accelerate all tax payments. Once this step is adopted the next logical procedure would be to provide for estimated payments of Federal unemployment-insurance taxes paid currently with FICA taxes. We recognize that if Federal coverage were to be extended to employers of one or more, administrative expediency would seem to dictate the requirement for elimination of quarterly payments. We hold that this is not sound legislation.

Furthermore, multistate employers having numerous transfers of employees between the various States find it most difficult to determine the amount of their Federal unemployment insurance tax liability for many months after the close of each calendar year. The elimination of the quarterly payments would be of particular disadvantage to these employers.

We respectfully request that these comments be made part of the minutes of the Ways and Means Committee hearings on these bills. We want to assure you at this time that the members of the social security committees of the Commerce and Industry Association of New York, Ind., hold themselves available for consultation with you on any of the above matters at any time.

Respectfully yours,

PETER G. DIRR, Chairman, Social Security Committee.

STATEMENT OF ARTHUR J. PACKARD, PRESIDENT, PACKARD HOTELS Co., MOUNT

VERNON, OHIO

Mr. Chairman and gentlemen of the committee, I am Arthur J. Packard. president of the Packard Hotels Co., with headquarters in Mount Vernon, Ohio, I operate seven hotels in that State, most of them being small properties. I am also chairman of the board of directors of the American Hotel Association, and chairman of the governmental affairs committee of that organization.

I welcome this opportunity to include a brief statement in your hearings, giving you the viewpoint of the hotel industry on this subject of unemployment compensation particularly as regards H. R. 8857.

The Bureau of the Census is authority for the statistics which reveal that twothirds of all the hotels of America average 50 rooms or less, and for these smaller establishments, the average is less than 3 employees. Even the properties possessing between 25 and 50 rooms have an average of only 4 employees per establishment.1

While it is true that there are a number of States under whose laws an employer of one or more persons is covered by unemployment compensation statutes, we contend that such extensive coverage by the Federal act could prove truly burdensome. Each State legislature should know intimately the circumstances which exist in that State, and it can extend this coverage to every employer if needed. It is notable that only 17 States have adopted such a proposal, and some of them have certain qualifying provisions in the law. It follows, therefore, that the Congress, by imposing a mandatory coverage under Federal law of employers of one or more (as proposed in sec. 1 of the bill), would be collecting a 3 percent unemployment tax at the Federal level without giving any benefits to the unemployed in many States.

Section 3 of the bill proposes another change of importance to us. In the average community, our year-round hotels do have a minimum turnover in employees boasting a rather stable record of employment. On the basis of this record, most hotels over the country have achieved an experience rating which has meant minimum assessments for unemployment compensation purposes. These ratings have been gained largely under the Federal statute which heretofore has required a 36-month test period. We feel quite strongly that the proposal to reduce this test period to 1 year would be unwise. First, it would extend the coverage to new employers, who might easily experience a very high mortality, and thus prove a very severe drain on the fund; and, second, it would expose the reserve funds to payments of benefits in excess of the contributions of the new employees thus penalizing oldtime stable employers.

We do wish to recite, also gentlemen, another provision of the proposed bill which would affect a part of our industry adversely. If you do away with the present requirement of 20-week employment, you automatically subject to the Federal tax a large number of seasonal, or resort, hotels which are only open 2 to 3 months a year. These are located primarily throughout the Northern States. If the 20-week provision is eliminated from the definition of the term "employer," these hotels would be required to pay taxes on each of these seasonal employees even though many of them would not and should not be eligible for any benefits under most State laws.

These employees are divided largely into two classes, namely, college students who are working during the summer vacation, and employees who have no regular all-year employment but earn this extra money by employment during the short summer season. In the same category are schoolteachers and others who have long vacations and supplement their income by working for these hotels during the summer. None of these classes of employees is legally or morally entitled to unemployment insurance benefits. The college student goes back to his college and the casual summer employee goes back to his or her school, home or farm. This situation is recognized by many of the State unemployment insurance laws, which provide that such student employees and persons who are not in the labor market during the winter are not entitled to unemployment insurance benefits. The Federal law does not recognize any exemption for these groups of employees. It serves little purpose to amend the Federal law to provide for the payment of a 3-percent Federal tax when the State laws extend no benefits to such employees. The persons who are really in the labor market and seek employment at all times of the year ordinarily get benefits under State unemployment insurance laws whether they work in resort hotels or otherwise. For that reason, we feel that the elimination of the 20-week provision serves no useful purpose. We earnestly request your committee to weigh carefully the proposed amendment to section 1607 as set forth in section 1 of H. R. 8857, out of which these inequities stem.

We are aware of the fact that there are a number of measures, H. R. 9430, S. 3553, and perhaps others, which are also pending before your committee. These contain what we regard as extremely unsound proposals. For instance, in the light of the fact that the United States Department of Labor reports an average unemployment duration of only 10.1 weeks during 1953, we find it difficult to 1 P. 10.41, Census Bureau Report for 1948.

understand why any group would recommend increasing this allowable duration to as much as 39 weeks.2 Also, the Department reports a declining ratio of beneficiaries who exhausted their benefit rights during 1953, as compared with the postwar high period of 1950. Further, they admit that extended periods of unemployment inevitably raise the question as to whether certain workers are an insurable risk under unemployment insurance programs.

A number of years ago, in 1945 to be exact, a spokesman for the hotel industry appeared before your committee on a subject similar to that which I am discussing here today. Your committee had pending before it at that time the proposal to fix maximum unemployment benefits at $25 a week for a period of 26 weeks. In that instance, also, we were afraid that the granting of too high a level of unemployment benefits would prove a premium on idleness. Congressman Robert Doughton, the then chairman of your committee, expressed a knowledge of some of the problems in our business when he said:

"I know a hotel man down near my home. I stop with him frequently when I am at home and I see him run his own elevator, getting up in the morning and making the fires, washing dishes, and working I do not know how many hours a day. He is still working when I retire at night, and I am a very early riser, and, when I get up in the morning, he is down at work making fires. He says he cannot get any help. I do not know whether it is because of a controversy over wages or whether they just won't work."

Mr. Doughton put his finger on one phase of our problem. Hotel work is sometimes tedious, and requires long hours. So in certain parts of the country availability of overly generous unemployment compensation benefits would contribute to an increased turnover in employees. We feel that the provisions of these other bills are unnecessary and unwise at this particular time. We are advised by your committee staff that testimony is not being taken at this time on these other bills, so we make no further reference to them.

Thank you, gentlemen, for the opportunity to present this statement to you.

STATEMENT OF JAMES E. KEYS, EXECUTIVE DIRECTOR OF THE NATIONAL SOCIETY OF PUBLIC ACCOUNTANTS

The board of governors of the National Society of Public Accountants, a professional organization representing full-time practicing public accountants in every State in the Union and the Territories, has voted to go on record as opposing H. R. 8857, a bill to extend and improve the unemployment compensation program. As the committee members know, this legislation would subject employers of one or more employees to the Federal Unemployment Tax Act. At present 17 of the States have subjected such small employers to unemployment taxes. Twelve other tax employers of less than eight. Obviously, this bill is drafted to bring the remaining 22 into line.

The great majority of our members are employers of small staffs. With the exception of those practicing in the 17 States which now tax employers of 1 or more, most of our members will be subjected to an additional 3 percent payroli tax if this bill becomes law. While at first blush this may not seem like a great sum, it must be viewed as an additional tax upon the private practitioner who is already burdened to the breaking point with State, local, and Federal taxes. The public accountant with a modest practice serving the small and medium-size businesses of his community deserves the encouragement of his Government rather than having heaped upon him an additional taxload. The statute as presently written leaves coverage of employers of less than eight a matter for the individual States to decide. We believe that the option should be left to the States. The individual States are best able to determine the question of coverage for the small employer on the basis of geographic and economic factors prevalent in a particular State. We are not convinced that the Federal Government is correct in assuming that what is good for California must also be good for all other States.

The full-time practicing public accountant in the average community is going to find this proposal extremely burdensome. A great many practitioners hire clerical help during the busy tax-filing season. In fact, many of our members operate without any year-round employees. This amendment would subject them to the tax on employees who work at any time during the taxable year.

2 P. 40, May 1954, The Labor Market and Employment Security. 3 P. 41, May 1954, The Labor Market and Employment Security.