finally it offers something for the Department of Labor in the form of more than doubling the Federal tax. Florida management recognizes H.R. 15119 for what it is a realistic compromise of points of view gathered after weeks of exhaustive study and testimony. Therefore, we sincerely hope this committee will report this measure in its present form and that you, Senators, will encourage your Senate colleagues to pass H.R. 15119 without amendment. Thank you for your attention. If you have any questions, I will do my best to answer them. The CHAIRMAN. Here is what troubles me about this whole matter. We started out with a program where the States provided the weekly benefits averaging about 65 percent of what their wage base had been. Over a period of years, due largely to the depreciation of the value of money and the fact that the benefits were not increased to keep up with it, the average weekly benefits now work out to be about 45 percent. So about two-thirds of the average weekly benefit has been lost due mainly to inflation and to the failure of States to adjust upward to take care of that. What objection would you have if we didn't take anything from you but simply provided an incentive for all States-Florida, which, incidentally, is a much wealthier State than Louisiana, and has lower benefits-Florida, Louisiana, and all States to get their level of benefits more in line with what they were when the program started out? Now, what is your objection to that? Mr. WOODARD. Senator, in our State we are presently-industry and government and labor are-studying this whole situation of the actual dollar benefits. As I said in the testimony, I believe that we have a good, workable law in our State today. We have, because of the peculiarities of our economy, great seasonal workers, we have had to readjust our own tax structure to take care of deficit employees, those who are a constant drain on the fund, and those with good experience rating. The CHAIRMAN. Well, now, are you required by law, by Federal law, to take care of those deficit employees or are you doing it by State law? Mr. WOODARD. By State law, as I understand it. We have to maintain a certain balance in the fund. The CHAIRMAN. Yes. Mr. WOODWARD. Incidentally, our fund is about, if my memory serves me right, approximately sufficient to take care of 311⁄2 years, in fact our fund is so solvent, so self-sustaining, that for the past 2 years we have had a tax credit for certain employers. The CHAIRMAN. Would you say you are doing some things for people who come into the State, who are now residents of Florida, that you are not required to do by law, by Federal law; is that right or am I wrong about that? Mr. WOODARD. We are try to make it as fair, and we would love to have those people to come in, we want an incentive for them to come. The CHAIRMAN. Well, the thought occurs to me that in Louisiana we have higher benefits than you have in Florida. Your per capita income is far higher than ours. Mr. WOODARD. Yes, sir. The CHAIRMAN. Our maximum benefits shown in this table are $40. I believe the State legislature just raised that to $45 but your maximum benefit is $33 in Florida. Mr. WOODARD. Yes, sir. The CHAIRMAN. And your per capita income is a great deal more, your prosperity is booming there. Even in Louisiana, though, I have complaints from my people in labor that that $45 amounts to about 45 percent of the average weekly wage, and that when the program went into effect the weekly wage was about $20 and the average maximum was about $18, so the maximum was about 90 percent of the average weekly wage. My thought is if we just provided some type of incentive which you could either take or reject, provided it was not of such a nature that you could not afford to reject it, something that you could take if you wanted to take it and not take it if you did not want to take it, what would be your objection to that? What would be your objection to an incentive for the States to raise their levels of benefits and to give the States credit for all the things that they do that they are not required to do by law, all in an effort to try to get the level of benefits up to somewhere as it was when we started the program. Mr. WOODARD. Don Summers, chief of the statistical section of the Florida Industrial Commission, tells us that approximately 55 percent of the claimants receive at least 50 percent of their wages. Those are the wages, those are the figures, of the Florida Industrial Commission. In direct response to your question as to the incentive program The CHAIRMAN. But you are talking about low-wage claimants, and your maximum benefit does not affect low-wage claimants; but as far as those who are making a substantial income is concerned, that $33 maximum would obviously mean that they would get less than half of what they had been making on a weekly basis. Mr. WOODARD. I think that we would be interested in studying and looking at any proposal concerned with incentives. I think this is one of the bases of our economy, incentive profit motive. The CHAIRMAN. Yes, sir. Senator Anderson. Senator ANDERSON. I was just interested, at the top of page 4 of your statement, do you know how much 8282 would raise costs and how much S. 1991 would raise costs? You do not say how much H.R. 15119 would. Mr. WOODARD. Approximately double our tax. I can get that figure of the amount that was paid in if you would care to have it. Senator ANDERSON. Do you think the passage of H.R. 15119 would about double your tax? Mr. WOODARD. Yes, sir. Senator ANDERSON. IS $15 million a rough figure for it? Senator ANDERSON. You do not have to answer this question if you do not want to. Are you a salaried employee of the association? 65-992-66- -40 Mr. WOODWARD. No, sir. Senator ANDERSON. What is your business? Mr. WOODWARD. I am in the grocery business. The CHAIRMAN. Senator McCarthy. Senator MCCARTHY. Did I understand there is a loan program that you have for employees who are unemployed? Mr. WOODWARD. We do not have a loan program. Senator MCCARTHY. I just heard it when I came in. I did not get the full description. What was the special program you had——— Mr. WOODWARD. I said that Senator MCCARTHY (continuing). Of workers in Florida as part of this program? Mr. WOODWARD. A loan program- Senator MCCARTHY. I did not get what it was, but you said you were glad to have people come in. Mr. WOODWARD. Oh, the Senator asked me concerning our wealth and Florida's economic situation, and people coming in. I said we were glad to have them come in. Senator MCCARTHY. You do not have a special benefits program under the unemployment compensation program? Mr. WOODWARD. No, sir. Senator MCCARTHY. Not like dependency allowance like they have in Massachusetts? Mr. WOODWARD. No, sir. Senator MCCARTHY. Yours is just a straight unemployment program? Mr. WOODWARD. Yes. Senator MCCARTHY. I caught the end of your statement and I got the impression that you were paying benefits out of the unemployment compensation that were somewhat different from the ordinary unemployment benefits. Mr. WOODWARD. One of our big problems, of course, in unemploy ment compensation, in the unemployment compensation picture in Florida, is the seasonality of workers in Florida, Senator. We have these deficit accounts to a rather large extent because of various seasonal workers, the canners and the packing plants, and things like that. Senator MCCARTHY. You would be particularly affected by the extension of coverage. Mr. WOODWARD. Yes, sir. Senator MCCARTHY. Thank you, Mr. Chairman. The CHAIRMAN. Thank you very much. Mr. C. W. Tuley of the Tennessee Manufacturers' Association. Mr. Tuley's statement was inserted. He was unable to get transportation because of transportation difficulties which we have these days. (The statement referred to appears on p. 285.) The CHAIRMAN. Mr. John Post of the National Petroleum Refiners Association. STATEMENT OF JOHN POST, NATIONAL PETROLEUM REFINERS ASSOCIATION Mr. POST. My name is John Post. I reside in Houston, Tex. I am here on behalf of the National Petroleum Refiners Association. The association is composed of 90 employers which operate over 90 percent of the refining capacity in the United States. From 1954 to 1962 I was a member of the Federal Advisory Council on Employment Security to which Mr. Lesser referred in his oral statement. In the hearings last year before the House Ways and Means Committee, I appeared on behalf of the 60,000 Texas employers and also filed a statement on behalf of this association. We recommend that the committee adopt H.R. 15119 as passed by the House of Representatives. For emphasis and to be brief, I will confine my own statement to two major points: 1. The proposed tax increase, and 2. The proposal in S. 1991 for minimum benefit standards. I will also refer to some extent to some aspects of interstate tax competition partly because Mr. Lesser referred to that, and I may comment on your last questions to the witness about the accuracy of the benefits as measured by 1939. I do not have to tell this committee that House bill 15119 bears very little relationship to H.R. 8282, which was the springboard for the hearings before the House, and that H.R. 15119 is basically a bipartisan bill which was passed almost unanimously by the House of Representatives. We are glad that your committee is giving it thorough consideration, because, as your staff report indicates, this bill represents the most comprehensive revision of Federal-State program of unemployment compensation Congress has undertaken since the system was inaugurated in 1935. Turning to the subject of the proposed tax increases, I stated above that our association endorses H.R. 15119 as passed by the House. We do this with reluctance because we seriously question the need to increase the Federal unemployment insurance taxes to the extent proposed by H.R. 15119. Just to increase the Federal tax from its present four-tenths of 1 percent to five-tenths of 1 percent, by one-tenth of 1 percent, on the present tax base of $3,000 will generate in fiscal 1968, $136 million more in taxes, of which $129 million will be available for State administrative expenses. This $136 million figure is derived from your staff report on page 7 in the middle of the page. This sets forth the amount of the extended benefit program and the same amount will be made available for administrative purposes. Now, from the staff report on page 33, it also indicates that in fiscal 1966, under present laws, State administrators The CHAIRMAN. Let me ask you this question. It would generate $129 million unless the States changed their program to reduce taxes by modifying the experience rating, wouldn't it? Mr. POST. No, sir. This is the Federal tax. The CHAIRMAN. The net Federal increase. Mr. POST. Just the Federal tax on the present $3,000 base. The CHAIRMAN. You said something about it going to State expenses. Mr. PosT. This is the money that will be raised by Federal taxes to be used to finance the State adminstration of the programs. The CHAIRMAN. I see. Mr. POST. And the Federal administration of the programs. These are purely administrative costs of which approximately 95 percent will go to the States, so that $136 million will be raised by just this one-tenth of 1 percent increase in taxes. Now, what kind of a deficit is that being used to meet? According to the staff report, as I read it, in its chart there the deficit in 1966 was $13 million; and the deficit in 1967 will be $20 million, so the single increase of one-tenth of 1 percent in taxes would tend to raise more than five times the costs they are designed to meet. Let us assume this deficit were to continue to grow at the rate of $10 million a year. It would still be somewhere around 1970 before the deficit would reach $50 million. It would be 1975 before the deficit would reach $100 million, and so it is difficult to understand why such a massive increase in taxes is necessary. Mr. Chairman, I said at the outset that we do not object to this bill, but it is important to bring these facts to your attention because of the persistence of the proponents of S. 1991 in imposing even greater taxes. If the Federal tax rate, on the other hand, were retained at fourtenths of 1 percent, but the tax base were raised from $3,000 to $3,900, then the new taxes generated in fiscal 1967 would be over $150 million, providing an even larger surplus than approaching its raising the tax rate. By 1972, estimated tax collections under H.R. 15119, on currently covered employers and available for administrative expenses, would reach over $900 million. This is an increase of 80 percent over estimated costs in 1967. Nowhere have we seen any estimates that administrative costs will even remotely reach that level between 1967 and 1972, so there is no rational justification, Mr. Chairman to increase both the tax rate and the tax base. An increase in payroll taxes of one-twentieth of 1 percent, 0.05 percent on the present $3,000 tax base, would be sufficient to meet the estimated administrative costs at least until 1970, and thereafter another increase of one-twentieth of 1 percent would be sufficient to meet such costs until about 1975. As between the increase in the tax rate and the increase in the tax base, we prefer the increase in the tax rate. There is no logical relationship between the level of wage rates paid by an employer and the unemployment insurance burden he should bear. A high wage rate employer does not necessarily have greater ability to pay than a low wage rate employer, and when an unemployed person uses the facilities of the unemployment insurance system, the administrative cost is the same whether his former employer was a high wage rate employer or a low wage rate employer. |