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been made repeatedly at hearings by State legislatures. The State legislatures, as shown in the cases of the 20 States I have referred to, have reached varying conclusions after having heard these arguments as applied to the situation in the particular State. Also at various times some legislatures have changed from their original conclusions as to their small employer exclusions, as well as other matters, in reframing their State laws.

The basic difference between out present State systems and a Federal system is that under our present arrangement States can and do frame their benefit formulas, their qualifying requirements, their disqualification provisions, and their small employer and other coverage provisions to fit their particular situation. Each State properly determines for itself what provisions are appropriate to its people and its economy.

This committee is presently being asked to overrule State judgment, and substitute Federal judgment. The specific State matter here is small-employer coverage, but this is an entering wedge.

You are urged to require 16 of your 20 home States to scrap their small-employer exemptions. You are asked to report out a bill under which a majority in the Congress would force coverage of small employers by all States, even though the great bulk of them have decided that small employer exemptions are appropriate for the particular State. You and the Congress are asked to do now what you have resolutely refused to do since the proposal was first urged before this committee 15 years ago—to substitute Federal judgment for the State legislatures' judgment as to this item of State coverage.

The proposal can but be reviewed as part of a pattern. The complete pattern includes, besides this proposed coverage dictation to States from Washington, dictation as to qualifications, disqualifications, benefit standards, and financing, which add up in aggregate to the whole of unemployment compensation. It is part of a nibblingaway process-federalizing State unemployment compensation bit by bit so as to thus achieve ultimately the same end results as would be achieved by directly scrapping State systems and establishing a Federal system.

Like every proposal for further centralization of authority, this proposal is urged on the basis that the end justifies the means. You are asked to accept the conclusion that any small employer exemption in any State is bad, even though a small employer exemption was originally recommended and one was adopted, and even though legislatures of a great majority of States, for their particular State, have concluded that a small employer exemption is appropriate. You are asked to force on all States a coverage detail which has been adopted as appropriate to their situation by only a minority of States.

It is not here appropriate to argue the merits or demerits of the varying small employer exemptions found in various State laws. Such arguments are properly made before the State legislatures, who frame local programs to meet local conditions. The proposal here presents a different and a basic issue—whether Congress or the respective States shall decide this State-coverage matter.

The CHAIRMAN. I think you have now consumed more than 10 minutes. If you would be willing to place the balance of it in the record to help out the other two witnesses I would appreciate it.

Mr. EMMONS. Certainly, sir.

The CHAIRMAN. If there is no objection that will be made a part of the record. Thank you very much. Mr. EMMONS. Thank

you. The CHAIRMAN. We appreciate the information you have given the committee. It is very fine and very helpful. Are there any questions? The Chair hears none. Thank you, sir. The balance of your statement will be placed in the record.

(The statement referred to follows:)

STATEMENT OF BLYTH EMMONS, DIRECTOR, WASHINGTON OFFICE, NATIONAL

SMALL-BUSINESS MEN'S ASSOCIATION If the proposal before you were to coerce the States which cover small employers to exempt them, rather than to coerce States which exempt them to cover them, exactly the same basic question-Federal control-would be before you. The principle involved would be the same, and the basic issue would be the same. Only the protagonists would be different.

Our organization would oppose Federal coercion as to coverage or noncoverage as we deem it inappropriate for the Congress rather than the State legislatures to pass legislation forcing either State inclusion or exclusion of small employers. For we believe this to be a State issue and not a Federal question. Our members may well have differing views on the merits of small-employer exemptions when acted on by their particular State. But we solidly oppose the pending proposal which would, in practical effect, strip State legislatures of their prerogative of passing on this State issue in framing their State laws.

To sharpen up the issue of principle involved, and to separate it from the matter of Federal tax consequences, might I point out that Congress could force State coverage of small employers without imposing the Federal tax on them. This coverage could be made a conformity matter, just as the deposit of State funds and certain other requirements are presently conformity matters. But we would oppose this approach for coverage extension or benefit standards or other Federal controls, just as earnestly as we oppose the Federal tax-extension approach, because the same basic principle is involved.

I should like to conclude this statement with a few observations as to some of the proposal's practical tax consequences, as distinguished from the basic issue I have discussed.

Under existing law somewhat under 600,000 employers have 8 or more employees. Only this 600,000 are subject to the Federal unemployment compensation tax. The proposed bill, by making employers of one or more taxable, would more than quadruple the number of employers subject to the Federal tax.

The 1.8 million small employers who would be made subject to the tax would pay the Federal Government an amount equal to the three-tenths of 1 percent on their taxable payrolls, assuming they are also subject to, and receive credits for, their State unemployment-compensation tax. They would be required to make an annual return, involving the compilation and reporting of payroll data on an annual basis, and also reporting their State unemployment taxes, and credits, etc. The work of assembling and reporting this data for many would be more of a burden than the payment of the Federal tax itself.

We understand that around a million of the million eight hundred thousand of these small employers are already covered under State law. Their added burden of Federal tax and the reporting would not affect the benefit coverage of a single employee.

The remaining 800,000 would pay an additional 3 percent in new payroll taxes unless and until they received reduced rates under their State laws. Let's take .for example a small business man who has a manager making $4,200 and three other employees averaging $2,500 per year. If the social-security bill you have just passed becomes law as written, the small-business man will pay an extra $18 social-security tax on himself and an extra $12 on his foreman. If you also add a 3 percent unemployment tax for next year, your actions will increase his total tax bill $345 for the year.

Is this proposed additional tax burden required by the public interest? Is it consistent with the policy you have adopted of providing tax relief?

Members of our association are keenly aware of the basic principle involved in H. R. 8857, and of the practical consequences which would follow from its adoption. We recognize the pressures on this committee for adopting this bill, but we know that these are not new pressures, nor is there any new situation which should justify reversing the position this committee has steadfastly maintained for a decade and a half. Accordingly, we urge and expect your committee to reject H. R. 8857.

The CHAIRMAN. The next witness is Mr. Samuel Fraser, the executive vice president of the International Apple Association.

I am very pleased to see you, Mr. Fraser. Mr. Fraser is a constituent of mine of whom I am very proud.

STATEMENT OF SAMUEL FRASER, EXECUTIVE VICE PRESIDENT,

THE INTERNATIONAL APPLE ASSOCIATION

Mr. FRASER. I have made my comments short in keeping with the committee's request.

My name is Samuel Fraser. I am executive vice president of International Apple Association, with offices at 1302 18th Street NW., Washington, D. C.

This association is composed of producers, shippers, and distributors of apples, pears, and other fruits, and has a membership of almost 1,400 firms, the majority being located in continental United States.

Many of our grower-shipper members, and those engaged in packing, packaging, and storing, are deeply concerned with these proposed changes in the unemployment-compensation program.

My remarks do not cover sections 3 and 4, on which I have little or no comment.

These changes may, if enacted, increase the cost of agricultural labor by 3 percent, and 3 percent on the labor item in these particular commodities, fruits and vegetables, is a very important matter, especially at a time when prices are showing a trend to decline.

The proposed language strikes out the present “20 days during the taxable year, each day being in a different calendar week” as well as the “8 or more” employees, thus making it mandatory to start payment of the excise tax at once if 1 employee is employed and the employee is immediately eligible to collect insurance payments.

We believe it would be helpful to retain some limitation with regard to marginal employees.

While this legislation affects all agriculture, I am confining comments and illustrations to fruits and vegetables.

In our membership, which is representative of the industry, we have all manner of types of management-cooperatives, commercial handlers, large growers, small growers, some growers distant from market who must grade and pack and ship, and others who may sell in nearby markets.

Is the purpose of this to place all agricultural labor in the unemployment-compensation program? If it is, we would ask for time to approach the problem from that angle.

The definition carried in present section 1607 (1) is stricken. The use of the language of section 1426 (h) will further limit the exemptions of agricultural labor. This will strike from the exemption all employees of the farm cooperative and the commercial handler and packer who now serve the grower in the important operations of handling, grading, sorting, and storing of fruits and vegetables in their preparation for market. In all former legislation, like treatment was given the cooperatives, the commercial handler, and the grower-shipper, whether large or small. We believe this is a sound approach and should be retained.

Some of the larger producers may grade, pack, and store their own fruit. A question has arisen as to what the amendment will do to such.

If the definition of employment as now carried in section 1426 (b) (1) of the act, as it pertains to FICA, is not carried in the amended legislation, then these producers may maintain their present exemption. What is the position of the present section 1426 (b) (1)? Will it, or similar language, be used? Îhat is important. or something similar is brought in, then the large grower will lose his exemption.

The small grower has always been a matter to be considered, and this is particularly important in many areas. They may grow the crop, but when it comes to handling, packing, packaging, grading, storing, delivery to market, and so forth, they turn it over to a cooperative or a commercial handler. At the present time these agencies are exempt when performing these operations. Under the amended legislation they may have to pay 3 percent excise tax on the first $3,000 of earnings of each individual employed. Costs, such as this tax, will be reflected back to the producer.

To harvest and pack crops there is need for a large temporary supply of labor in the rural areas. In the fruit districts, schoolchildren and high-school children and others aid in the work, and frequently the women turn out. Employment may be for a period of 2 weeks, 3 weeks, and then an interval with a seasonal total of, say, 15 weeks.

In the aggregate a considerable sum of money is earned for the usual rate of payment is good, but the number of workers securing it is relatively large and the individual amount is not large. These people do not usually seek employment at other times. Is it wise to make these people eligible for unemployment compensation?

The amount of money which would be collected might well be inadequate to meet the cost which would be thus thrown on the fund by the addition of marginal employees. As soon as such employees have qualified, they will most certainly collect unemployment insurance, and at the present time this is markedly affecting the number of employees in rural areas. They use up the time secured in industry before seeking further employment.

The question may well be considered whether this is a sound financial undertaking, and all labor may well be concerned as to the effect of such.

I cite some instances-Dwinnell Bros., Oroville, Wash.. employed 54 packing workers for the packing season; 25 women worked only during the harvest; 24 were itinerant workers; 5 were employed elsewhere part time. The itinerant worker is also a difficult one to work into the financial structure. A common period of seasonal employment is 15 weeks, and they would then be qualified for 20 weeks of unemployment insurance in certain States.

The seasonal worker has always presented a problem and is still a problem under this proposal. We see difficulty in securing sufficient payments to the fund to meet the drafts which will be made on it. If this amendment is enacted, the job of policing itinerant or seasonal workers, schoolchildren, high-school children, women, undoubtedly will be practically impossible.

If all agricultural labor is to be placed under the unemploymentinsurance provisions, then we would seek some way to meet the problem of temporary labor and the itinerant worker and provisions such as are now carried in section 1426 (b) (1) might weil find a place.

We do not seek the inclusion of agricultural labor in the unemployment-insurance program.

At the present time we believe it would be more realistic and helpful to the economy of the Nation to not report H. R. 8857.

The CHAIRMAN. I notice you have two telegrams attached to your statement.

Without objection they will be placed in the record. (The telegrams referred to follow:)

OROVILLE, WASH., June 2, 1954. Congressman Walt HORAN, Congressman Hal HOLMES, Congressman DANIEL Å. REED,

House Office Building, Washington, D. C. We are strongly opposed to H. R. 8857. Last year we employed 54 packing workers none of whom were employed the year round. Twenty-five women worked only during the harvest. Twenty-four were itinerant workers. Five were employed elsewhere part time. Believe other fruit and vegetable packing houses will show similar experience.

DWINNELL BROS. ORCHARDS,
JIM B. DWINNELL.

WENATCHEE, Wash., June 2, 1954. Sam FRASER,

International Apple Association: Following wire sent Chairman House Ways and Means Committee; also Horan and Holmes. Similar wire Senators Magnuson and Jackson. Understand H. R. 8857 scheduled for hearing June 8. Enactment would impose additional costs on all producers of fresh fruits and vegetables. Wenatchee-Okanogan fruit district packing operations is done almost entirely by students during school vacations and women, mostly housewives, resident in the area who do not seek employment except during packing season. Bringing this class of labor under Unemployment Compensation Act would simply provide rocking-chair money during period when they are not seeking employment. Apple- and pear-packing operation this district lasts about 15 weeks. Compensation tax this period would not equal amount necessary to pay for 20 weeks unemployment. This association is composed of grower owned and operated cooperatives and individual producers who perform their own services and firms who prepare fruit for market for growers at cost plus small margin of profit. Urge your efforts to continue present exemptions of labor used in preparation of fresh fruits and vegetables for market. Unquote. Presume you acting on this matter.

NORTH CENTRAL WASHINGTON WAREHOUSEMEN'S ASSOCIATION. Mr. FRASER. Thank you. I would like to add, Mr. Chairman, the States have the marginal interest. Their part is 90 percent. Certain States have already sought to protect their funds by providing a proportionate withdrawal based on the amount and time in which it has been collected so that those who contribute little receive less than those who made the major contributions.

Other States, as in New York, at the present time are giving the matter further study. Altogether the situation is one which might well at this time be given to the States to work out, to work out a solution.

There is one other thought, Mr. Chairman, on collection of taxes. If the problem of collecting taxes, 30 percent of our income is going

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