We know that there are many programs other than unemployment insurance which are being administered by the State agencies. But we feel that the financing of such other programs should be handled in the other programs rather than using unemployment insurance funds.

Mr. Chairman, in my statement I discuss the question of whether or not this base should be increased just because the social security base has been increased, I will not discuss it orally here, except to point out that it would be just as logical to argue that the tax rates for unemployment insurance should be raised just because social security rates have been raised.

We support this bill but we urge the committee to recognize that any proposed tax increases now in the bill are far greater than needed and certainly do not justify any further increase in taxes.

I will not discuss the subject of extended unemployment compensation or judicial review. They are covered in my statement.

I would like to discuss the proposed minimum benefit standards in S. 1991. These proposals are similar to those in the House bill, to impose on the States certain minimum benefit standards for weekly benefit amounts, qualification for and duration of benefits. Although the weekly benefit amounts and the provisions for qualification and for duration are quite interrelated, the heart of the matter is the weekly benefit amount. This proposal is based on the frequently discredited argument that States have failed to provide adequate benefits and it is also based on flimsy evidence that interstate tax competition has in effect required the States to keep the benefits low. These arguments have been refuted so often and so thoroughly that I have not included them as a formal part of my statement. I have however attached a portion of my statement last year as to those two points.

Since the statement last year, we have been able to figure out what would be the effect of a 50-percent standard geared to average weekly wages of covered employees, I think you will be interested in finding from the staff report's figures that a standard of 50 percent or any other figure which is geared to average weekly wages of covered employees won't necessarily work the way the advocates propose.

If you will turn to page 9 of my statement, you will see that there are a number of States where the maximum weekly benefit as a percentage of the average weekly wage of covered workers was less than 50 percent and nevertheless in those States the percentage of claimants eligible for a weekly benefit equal to at least half their weekly wage was greater than 50 percent.

By the same token, a number of States which met the 50 percent standard as to its maximum, nevertheless failed to provide a 50-percent benefit for at least half their claimants. So that trying to provide a benefit of 50 percent of a claimant's wages for a majority of claimants though trying to use this approach is not going to be effective.

In addition, therefore, to the basic argument about adequacy of benefits and interstate tax competition, gearing the standard to the average weekly wage of covered employees is not effective and is quite inequitable among the various States.

The reason for its inequity is that the States differ so in their industrial composition. All you have to do is look at the District of Colum

bia and compare that with Michigan and with Wyoming or New Mexico or Arizona, and see that the States differ, and the occupational structure of the unemployed differ in each State. Trying to standardize it through this approach of having a maximum of 66% percent or 60 or of 50 percent of the average weekly wages of covered workers is not going to achieve the goal which is sought, namely, assuring that 50 percent, at least 50 percent of the claimants will receive at least 50 percent of their own pay.

I would like to pass quickly to this subject of interstate tax competition because it has been raised here. In making decisions as to where to locate refineries, for example, the question of unemployment insurance taxes is not even remotely considered. Certainly in the question of whether to put a refinery in Louisiana or Texas or in Pennsylvania the impact of unemployment insurance taxes as such is so infinitesimal compared to other factors that we would not even think about it.

The CHAIRMAN. It might not be for your industry but let me just say to you I have had a lot of industrialists tell me this, when they get ready to decide where they are going to put their next plant, they take every cost they would estimate it would take them to operate that plant including the cost of building it, and add them all up, and compute their costs of operation, and when they get through adding up that column of figures the State that shows up with the lowest operat ing costs is the one where they feel they would put that plant. I have had more than one tell me that.

Mr. POST. Yes, sir, there is no question about the fact that they look at the overall operating costs. But in looking at the overall operating costs the impact of unemployment insurance taxes has no particular significance compared to access to raw materials, wage rates, the availability of labor, business climate.

The CHAIRMAN. Well, it is a lot less impact than some other things, but if you are talking about which side of the Sabine River to put the refinery on, it makes a lot of difference because by the time you get down to where you have got the same relative labor costs, you are going to use the same labor in either event, it is just a question of whether it is a Texas county bounded by Louisiana or a Louisiana county bounded by Texas, and if your transportation costs are the same, and the wage costs are practically the same, and most items are the same, what items are you going to separate on? You are going to separate it on the tax feature that will be one of the big features to separate you from the other and we just adjusted our tax structure down in Louisiana to be in competition with Texas and in the very industry you are talking for and we have been putting more plants and refineries in Louisiana since that time. You have been getting some which we should have been getting when we adjusted our tax downward and we think we stopped that. We do not say we are stealing them from you but we just say we are more competitive than we were before.

Mr. POST. I can admit that, being from Texas, but I am quite satisfied in the decisions of whether to put refineries in that area between Baton Rouge and New Orleans or put them in Beaumont, taxes were scarcely considered. There are many more important factors.

The CHAIRMAN. If you are talking about the New Orleans area you get a greater diversity of transportation problems which might very

well make a lot of difference, but if you are talking about the Lake Charles area, where we have refineries, compared to that same area that you mentioned, those transportation problems are not nearly as compelling as they are when you get to areas that are close together. Mr. POST. Well, Mr. Chairman, speaking of Lake Charles, with which I am not as intimately familiar as you are, I would suggest that maybe the cost of real estate and many other factors might be as important as putting a refinery in Beaumont. In other words, there is a whole conglomeration of factors which enter into these decisions, and the impact of unemployment insurance taxes is so insignificant that it is hardly useful as an excuse on which to base a complete revision of the unemployment insurance system.

The CHAIRMAN. Here is a document that shows that 49 percent of Texas wages are lower than Louisiana's minimum, which is 0.9 per

cent.

Mr. POST. I think, Mr. Chairman, in regard to that, you have to look at the industrial composition of the State, and you would also have to compare industries because it is industries which compete with each other rather than States in that regard.

Now, I am not sure what kind of industries are in this composition and what, for example, the rate in refining in Louisiana is compared with Texas. But let's assume just for the sake of discussion that the rate in Texas were one-half of 1 percent less than the rate in Louisiana for refining. What does that mean in wages? It means less than 1 cent an hour, less than 1 cent an hour, so really it is not a very significant amount in determining whether you put a refinery in one place or another.

The CHAIRMAN. Well, I gave an example that on a shipbuilding contract, Louisiana bidding against Maryland, by the time you get through with all other items and you just look at the unemployment insurance problem, assuming they have got a high experience rating, which I assume they have, the argument that they ought to have the contract in spite of their high bid, was the fact that they had a lot of people out of work up there, and so I would assume that would give them a high experience rating and I feel the high experience rating of theirs compared to our shipyards on a $50 million contract that would cost them about $1,750,000 more than it would us, with our low experience rating in Louisiana even though we have a 0.9 minimum.

Mr. PosT. It cannot be that on a $50 million overall contract the additional difference would be a million dollars.

The CHAIRMAN. What is the high point on the Maryland experience rating.

Mr. POST. You see, Mr. Chairman, you have to also recognizeThe CHAIRMAN. Let's see if you are correct or not. Now here is Maryland, on page 47 of your blue sheet, sir; 4.2 is their maximum tax. Now Louisiana's maximum tax goes up to 2.7, but you see in Louisiana we have an additional advantage. We are bidding for a shipyard that has a low experience rating so our minimum is 0.9. If you take 0.9 against 4.2, that gives you 3.3, and on a $50 million contract, you divide through there, you would get

Mr. POST. Well, sir, the 3.3 assuming that is so, which I am not ready to accept, is still on a $3,000 base. You would have to get the

payroll and number of people and find out how many they are and if we are still using this

The CHAIRMAN. Well, the average pay in our plant works out to be $3,500, so you are coming close to that.

Mr. PoST. But the tax is levied on up to $3,000. It is not levied on anything above that. So that 3 percent of $3,000 would be $90 a which is less than 5 cents an hour. It is not $1 million.

year,

The CHAIRMAN. Well, assuming that only half that payroll is subject to that tax, assuming only half of it is subject to that tax, you would still show up with about an $800,000 difference. In that kind of bidding it is not unusual to win as we did, we won by a hundred thousand dollars and if you are talking about an $800,000 advantage on that one item.

Mr. PosT. I think that—are you saying the payroll is $50 million? The CHAIRMAN. The contract is $50 million.

Senator ANDERSON. That is the trouble.

The CHAIRMAN. OK, reduce it again, say labor is only half of it, you still show up with a $400,000 advantage by the time you get through reducing all these factors.

Mr. PosT. I think you also have the assumption, do you not, that this shipyard in Maryland is paying a maximum rate. You will notice in Maryland there is a zero rate possible. I am not suggesting that that is so.

The CHAIRMAN. Well, the reason the Maryland shipyard is getting it is that it came down to Washington to throw out our little bid because they had so many people unemployed in that area, now including that shipyard, so I would assume they would have the high rate.

Now, frankly, it is passing strange to me in my connection with State government, when I served there before I came up here, and I still have contact with the State government, that all the chambers of commerce groups, every time we talked about increasing benefits under unemployment insurance, came out with their first argument: "This is going to keep industry out of our State, this is going to raise our costs, and by the time we raise our costs in competing for industry we will be less attractive than the State with which we have to compete. This will either remove a competitive advantage we have or more often this will put us even more at a disadvantage in an area where we are disadvantaged already."

Well, I find it strange to hear that argument in Louisiana, which is always the first argument, I am told, and then to come up on this end and be told that that does not have anything to do with it. So somebody has got to be wrong, it is either my local chambers of commerce in Louisiana or the national outfit up here, it is either people at the ground level or their association's representatives but somebody should clear me up on this. You fellows ought to get together, either my local chamber of commerce is right or the national chamber is right, but it cannot be both. They have provided different answers.

Mr. Posт. Mr. Chairman, in that regard, I understand entirely what you are saying. I have urged our people at the State level not to make that argument. It is erroneous, in fact, and it is hypocriteal to say it there and then have another argument here.

The CHAIRMAN. Well, they ought to quit telling

Mr. POST. The real question is what are the facts and not what these fellows say and I would hope these hearings and the action on this bill would completely eradicate that kind of an argument both at the State level and at the Federal level. I said so in my testimony last year and I say it again here. It is an unsound argument and it has no basis. It should not be used as a basis for completely revising the unemployment insurance system.

The CHAIRMAN. Well, I suggest that those people you are supposed to represent should quit telling it to the Legislature of Texas and the Legislature of Louisiana when they start raising benefits for unemployment insurance at the State level because what happens is you come up here and they say, "Well, it ought to be a State matter," and the same groups go to the State legislature and say, "The States should not raise their benefits, we would not be competitive," and then come up here at this end and say it does not have a thing to do with it. Mr. POST. If anything has been accomplished by these hearings, it is getting on the record the position of the employers, as I have stated it today, so they can be confronted with it at the State level when taking this position. I entirely agree with you, I think it is an erroneous argument and should not be made in the States or here and, as I said in my statement, it is making mountains out of molehills and should not be used on either side. The main thing is what are the facts and on the facts, the unemployment insurance tax will have very little impact on business decisions.

In my statement attached I discussed the refining industry and that was generated by a comment made in the hearings last year. I might just comment briefly, Mr. Chairman, on your question of the previous witness about the benefits in Louisiana, and I am not undertaking to talk about Louisiana, but just to suggest an approach. In the appendix to the statement I filed today on page 4 is a table which shows the relationship of benefits in 1939 to benefits in 1965. I have some serious question as to whether 1939 is a good date. The world changed so drastically betwen 1939 and the end of World War II, that probably some postwar date ought to be taken to see if the States have kept pace. But even taking 1939, if you look at the whole benefit picture you have to take into account the increase in duration in benefits as well as weekly benefit amounts, and you will see that between 1965 and 1939 benefits in Louisiana were multiplied three and a half times which was far greater than any change in conditions. In most other States when you include duration with the amount of the increase in benefits, you find there has been a tremendous increase in benefits provided by the States, and that they more than kept pace with the increase in wages.

I will be glad to answer any other questions. We appreciate the opportunity to appear, and as I said, we endorse this bill as the best overall job that could be done under the circumstances and we hope it will be enacted.

(The prepared statement of Mr. Post follows:)

STATEMENT OF JOHN POST, REPRESENTING THE NATIONAL PETROLEUM
REFINERS ASSOCIATION

SUMMARY OF NPRA STATEMENT

(1) The National Petroleum Refiners Association is generally in accord with HR 15119 as passed by the House of Representatives and urges the Senate Finance Committee to adopt HR 15119.