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employers for unemployment compensation purposes? In view of the fact that few States use a 3-year base, and most are 4 or more, it is obvious that they regard the longer period as necessary to adequately measure unemployment risk. Because of this, there seems to be little necessity for change in the Federal law.

SUBSTITUTION OF ANNUAL FOR QUARTERLY PAYMENT OF THE FEDERAL UNEMPLOY

MENT TAX

This provision of H. R. 8857 would seem to be directly related to the proposal to extend coverage of the Federal act to employers of one or more.

If the coverage amendment is enacted, it is obvious that the administrative burden or quarterly tax payments would be considerable for the Treasury Department.

It does not seem equitable to require lump sum annual payment of the Federal unemployment tax, regardless of the fact that some 85 percent of the total taxes due are now paid at the time of filing the return. This requirement may impose undue hardship on many employers in the absence of a demonstration that the revenue needs of the unemployment compensation system require a lump-sum payment. Administrative convenience should not be the sole criterion in this regard.

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H. R. 8585 would provide Federal supplementation for the purpose of financing temporary liberalization of unemployment compensation payments to persons unemployed because of Federal tariff or trade policy. The Congress has considered the question of Federal supplementation of the unemployment compensation program from time to time in the last few years and has rejected it each time.

Treating a specific type of unemployment and according it preferential status would quickly undermine our existing unemployment compensation program. This danger was clearly recognized when Congress rejected the Moody-Dingell bill in 1952 and the perennial proposals to provide grants to States whose reserve funds were in danger of insolvency.

The public interest is not served when special groups receive preferential treatment; the concept of unemployment compensation as a self-sustaining program financed by payroll taxes on employers which is now universally accepted would be destroyed. We cannot afford to adopt as national policy the concept that the Federal Government should make whole the losses of individuals or particular groups—if adopted, this could be used to justify almost any kind of raid on the Federal Treasury:

In summary, NAM respectfully urges the following action on the unemployment compensation bills now before you.

1. Rejection of the proposal to extend coverage of the Federal Unemployment Tax Act to employers of one or more at any time;

2. If coverage for Federal employees is desired, the approach taken by H. R.. 6537 and H. R. 6539 is preferable to that taken by H. R. 7054;

3. Permitting the States to grant reduced rates to new employers is a step that seems to be unnecessary in the light of present State practice; and

4. Federal subsidy of the State unemployment compensation programs should not be permitted under any pretext.

Thank you for the privilege of filing this statement of our views.

Rail STEEL BAR ASSOCIATION,

Chicago, Ill., June 1, 1954. Subject: Statement for the record in the hearing, Tuesday, June 8, on H. R. 8857. CLERK, COMMITTEE ON WAYS AND MEANS, Room 1102, New House Office Building,

Washington, D. C. GENTLEMEN: It is desired to place on the record in the above hearing, 6 points in objection to the expansion of unemployment compensation to all employees previously exempted where firms had less than 8 employees.

In opposition to the assumption that all employees can have exactly similar unemployment-compensation treatment regardless of employment background, we wish to place the following points on record:

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.

MISSISSIPPI EMPLOYMENT SECURITY COMMISSION,

Jackson, May 10, 1954. Hon. DANIEL A. REED, Chairman, House Committee on Ways and Means,

House Office Building, Washington, D. C. DIAR 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, Demo

crat, 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.

(6) 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 du ing the summer vacation, and employees who have no regular all-year employment but earn this extra money by employment during the short

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

1P. 10.41, Census Bureau Report for 1948.

summer season.

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