Now, the man who has been given his retired pay earned it according to Mr. Paul Kilday and the Armed Services Committees, and those incidentally are the people before whom I have been appearing for the last dozen years on military legislation, and having learned that he pays income tax on it just like any other income.

Therefore, to compare that or to equate it with VA compensation, which, of course, is tax free, is a complete error. Moreover, the number of people involved is very considerable and I know that because in one committee alone I have something like 3,500 retired officers and permit me to add that retired enlisted men would be precisely in the same category, and we are equally concerned about them, who have disabilities for which they have been given a rating by the VA in excess of 30 percent or more, and that these are disabling disabilities and I would say that of the 3,500 who are particularly concerned in this one committee even, fully 50 percent of them are in that category. Yet no matter what you do about VA compensation they gain no benefit because the VA compensation that is paid them is deducted from their retired pay. The only benefit as a matter of facts is the very minor one that the portion from the VA is nontaxable as to income tax.

I just looked through our file and hastily picked out a couple of letters here which refer to this matter and one of them is from a man in Kentucky here who says among other things:

I cannot draw both, meaning VA compensation and retired pay, but to my way of thinking this is an injustice to the person who has put in the required number of satisfactory years to obtain U.S. Army Reserve retirement, and also be unfortunate enough to incur a service-connected disability. And, in parenthesis, says, "As, for me, wounded in action, April 18, 1945, at Ansbach, Germany, and am drawing compensation from the Veterans' Administration." If a person should be qualified individually under both systems, he should be able to collect from both systems.

I have a rather interesting letter which I have a copy of it before you also, from Mrs. Dunton, out in Spokane, Wash., and she, among other things, says:

I write you concerning another matter which I consider even more urgent and for which I hope to gain your efforts at the National Council Meeting, and so forth.

There is a very serious inequity existing in the law which governs a casesuch as the following: A retired Reserve officer, having served for 20 years in the Army and attaining the age of 60, is entitled to his retirement pay. He is rated 50-percent disabled service connected and should be given a VA disability compensation. Now, in order to receive one of these, he must relinquish the other even though they have been granted to him for entirely different reasons. I feel your association should do something about it, and so on.

Now, I was given the privilege last year of reading the letter from the Veterans' Administration which sought to justify their contention that this was in effect, according to them, dual compensation, or what they call a pyramiding of benefits.

Here is the basis of their argument reduced to a few words of the many which they used in several pages of argument.

A letter, incidentally, to Mr. Teague and, dated June 1964. Here is the attitude of the VA. There seems no doubt that military retirement pay based on disability, military retirement pay based on longevity and VA compensation are each designed generally to accomplish

the same general or basic purpose, to assist the veteran because of military service who has suffered an impairment of his ability to support himself. Hence, the three benefits are interchangeable as we pointed out in our report of April 24, 1964, the enactment of the subject bills would permit the pyramiding of these interchangeable benefits.

It is almost inconceivable to me that anybody in the VA should be as ignorant as the letter indicates or he should think the members of this committee are that ignorant, because I am very sure they are not.

In reply to that, I have a letter copy, or an excerpt from it here, I have submitted to you that I would like to read:

We have read with thoughtful attention the report of the Veterans' Administration on these bills, and we are surprised and disappointed to find in that report no reference to the situation which brought about their introduction in the first place; namely, the inequity imposed upon retired military personnel who retired for longevity and service, and who develop service-connected disabilities, and who then have the amount of their VA compensation deducted from their retired pay. This results in the fact that they gain no benefit whatsoever from their VA compensation, save the very minor benefit due to the fact that the VA compensation portion of their income is free from income tax. In practical effect, this sets longevity-retired military personnel aside in a special category of lessened rights, and denies them the benefits of VA compensation for service-connected disabilities, which benefits are available to every other qualified person except such military retirees.

We feel that there is absolutely no justification for this discrimination. On the contrary, we feel that of all persons who have served in the Armed Forces of the United States, the ones against whom such discrimination is most reprehensible are those who have suffered disabilities by reason of their military service, which disabilities have reduced their remaining earning capacity.

To emphasize how ridiculous it is to call longevity-retired pay and VA compensation interchangeable, I also have submitted to you a quotation from a report of the Armed Services Committee, incidentally, at the time when Mr. Kilday was connected with it.

In the cases of officers entitled to retired pay, the Committee on Armed Services is of the opinion that such pay has been earned, and so forth.

If it has been earned, it certainly is not interchangeable with VA compensation.

I have emphasized this again in an additional comment which I will simply leave with you without reading, but you have it before you.

It seems to me that there is another aspect and I would like to emphasize that. There is a comparable situation where the VA itself takes issue with its own stand and that is the situation where a person properly qualified may receive old-age and survivors' disability pension, and VA compensation, currently.

Now, the philosophy that appears to be and as a matter of fact it should be, that these two awards are given for entirely different causes. That is also the case with regard to VA compensation and longevity retired pay from the military. It seems to me they either must take the same view with respect to this bill or else they must change their point of view with regard to disability under the OASI.

I think that just about tells the story. I wanted to do this informally, Mr. Chairman, and you permitted me to so, which I deeply appreciate. This is my first appearance before this committee because I am normally concerned with military retirement.

Mr. DORN. What did you want in the record, just this paper here, or what?

Colonel OLES. I think perhaps those items that I have left with you would be pertinent. They call for a certain amount of study.

Mr. DORN. All right, they will be included in the record. (The data referred to follow :)

Col. FLOYD OLES,

Reserve Equalization Committee,

Office of the Secretary,

Tacoma, Wash.

LOUISVILLE, Ky., December 7, 1964.

DEAR COLONEL OLES: Many thanks for your letter of November 26 concerning my interests in the 88th Congress, House bill H.R. 6438, which would have had the effect of permitting service-connected disabled veterans who are retired members of the Reserves to receive compensation concurrently with retirement pay, without deduction from either. In other words, since I draw a disability allowance from the Veterans' Administration for a service-connected disability I am forced to waive that for each day I serve in the U.S. Army Reserve.

As the law now states, when I am retired from the Army Reserve I shall have to make up my mind which compensation to take, whether to continue with the disability allowance or at age 60 to request USAR retirement benefits. At the present time, as you know, I cannot draw both but to my way of thinking this is an injustice to the person who has put in the required number of satisfactory years to obtain USAR retirement, and who has also been unfortunate enough to have incurred a service-connected disability (as for me WIA April 18, 1945, Ansback, Germany), and is drawing compensation from the Veterans' Administration.

If a person should be qualified individually under both systems then I should be able to collect from both systems. This, Colonel Oles, is what I am most interested in and would be very happy to learn from you as to what I may do toward the successful introduction and passage of such legislation. I am enclosing a copy of H.R. 6438 which was sent to me by my Congressman but, of course, since it was not passed in the 88th Congress it must be reintroduced in the 89th and that begins next year. Your thoughts on this subject will be most helpful.

Sincerely yours,

OWSLEY C. COSTLOW, Lieutenant Colonel, Armor, USAR.

Col. FLOYD OLES,

Reserve Officers Association.

SPOKANE, WASH., February 14, 1961.

MY DEAR COLONEL OLES: I have had several letters from you concerning the Reserve equalization committee legislation.

I write you now concerning another matter which I consider even more urgent and for which I hope to gain your efforts at the national council meeting on February 23-25.

There is a very serious inequity existing in the law which governs a case such as the following:

A retired Reserve officer, having served for 20 years in the Army Reserve and having attained the age of 60, is entitled to his retirement pay.

This officer is also rated as 50 percent disabled (service-connected) and has been given a VA disability compensation.

Now in order to receive one of these he must relinquish the other, even though they have been granted to him for entirely different reasons.

I feel that your association should press for legislation to correct this gross injustice.

Wou'd you be kind enough to see that this request reaches the persons delegated to handle matters of this nature?

Thank you very much for all of your interest in matters of this kind.

Sincerely,

ETHEL A. DUNTON.

STATEMENT OF RESERVE OFFICERS ASSOCIATION OF THE UNITED STATES. The response of the VA to request for comment on H.R. 5319 is not responsive to the basis on which this legislation was introduced.

The VA seeks to equate VA compensation, military retired pay for age and longevity, and military disability retired pay, as all three simply compensate for loss-of-earning capacity. This is completely untrue and wholly opposed to the entire basis and justification for military retired pay earned by age and length of service, which latter is earned compensation, subject to income tax, and earned by long military service.

The VA also asserts that what it regards as "dual compensation" is contrary to its policy, but it ignores the facts, which do not support that statement. A person so qualified may receive a disability pension under the old age and survivors insurance system, and also VA compensation for service-connected disability, without deducting one from the other. This situation is precisely comparable with the intent of H.R. 5319; i.e., it conforms to the sound doctrine that one should and can receive concurrently two benefits which are independently earned, derived from different sources, and are in essence unrelated. That is exactly the doctrine which the VA supports in the case above described, and which we urge be adopted in the case of H.R. 5319.

Military longevity retired pay is, as stated by Congress and the Department of Defense, "deferred compensation for services previously rendered," is fully earned at time of retirement, and its status as earned income is attested by its taxability as earned income under the internal revenue laws. VA compensation, quite on the contrary, is a modest form of compensation for loss of earning capacity due to service-connected disability resulting in loss of earuing capacity. The two are thus wholly unrelated and separately earned and justified. Deducting one from the other is therefore both unjustified and inequitable in the extreme.

RESOLUTION OF NATIONAL COUNCIL, RESERVE OFFICERS ASSOCIATION OF THE UNITED STATES, MARCH 1, 1963

Whereas it is the position of the Veterans' Administration, as stated in its regulations, that: "A person actually retired and receiving benefits under the provisions of title III, Public Law 810 (cannot) receive Veterans' Administration compensation or pension, ***." (Public Law 85-56, sec. 1004.); and

Whereas there is no provision in Public Law 810 which either provides or implies any such limitation upon the rights and benefits accruing to retired military personnel, such limitation being based solely upon regulations and law relative to the Veterans' Administration; and

Whereas it has been and remains Department of Defense policy, from which we quote, that "Retired pay is earned income and constitutes deferred payment for services previously rendered," a principle that has been repeatedly embodied in congressional enactments and in court decisions; and

Whereas VA compensation is a wholly unrelated form of compensation, dependent upon, and measured by, injuries received while in the service of this Nation, which injuries have been found to reduce to a compensable degree the earning power of the victim of such injuries; and

Whereas military retired pay is fully earned at the time of retirement, and its reduction because of receipt of compensation from other sources is wrong, inequitable, and destructive of the entire concept upon which military retirement is based; and

Whereas any reduction in military retired pay by reason of receipt of compensation from other sources, as presently provided by VA law and regulation, has the effect of reducing military retired pay from the status of earned income to that of a simple gratuity; and

Whereas the present VA law and regulation discriminates against those who have suffered disability and reduced earning capacity by reason of serviceconnected disability, by unfairly reducing their earned retirement income, whereas those who suffered no such disability are permitted to receive their retirement pay in full: Now, therefore, be it

Resolved by the National Council, Reserve Officers of the United States, in semiannual session assembled in the city of Washington, D.C., this first day of March, 1963, That we support legislation in the Congress, and amendment of

VA rulings and regulations, so as to permit the receipt by retired military personnel of both their earned retired pay and such VA compensation as they may be entitled to receive, without limitation or the offsetting of one against the other.

Mr. DORN. Any questions?

Mr. TEAGUE of California. No questions. You are a very good advocate.

Mr. ROBERTS. I would like to make one comment. I am a former vice president of the Reserve Officers' Association, but with reference to your old-age assistance, this is a welfare program, unfortunately. It is not an earned right. It is a welfare program.

Colonel OLES. That is correct.

Mr. ROBERTS. So your analogy does not actually follow because it is a welfare program. Certainly, we don't want to state that a veteran's compensation is a welfare program.

Colonel OLES. I am quite sure I agree with you on that.

Mr. ROBERTS. Thank you.

Mr. DORN. Thank you very much. As there are no further witnesses to be heard this morning the committee will stand adjourned until 10 o'clock in the morning.

(Whereupon, at 11 a.m., the subcommittee adjourned, to convene at 10 a.m., Wednesday, April 28, 1965.)