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The coal industry is willing to pay (and, of necessity, pass on to the consumers of coal) the cost of unavoidable unemployment for its workers. With a welfare fund of 40 cents per ton (nearly 10 per cent of total selling price), the coal industry is already showing its awareness of responsibility to employees. But unnecessary and unwise increases in the "payroll" burden can and will cripple those industries (like coal) which furnish a high percentage of job opporunities. If society must furnish a high standard of living for those who become permanently unemployed, the burden of doing so should fall on the income of society in general, through the general tax structure. If this burden is shifted to payroll taxes, it will simply mean that industries (like coal) which furnish job opportunities will be further discriminated against in competition with industries which involve a low incidence of job opportunities (like atomic power and imported energy).

We believe it would be detrimental to our Nation to offer unemployment benefits (on a level competitive with the "take-home pay" of available job opportunities) for an extended period of time to persons who simply quit their jobs because of preference. H.R. 8282 and S. 1991 would do this. H.R. 15119 would not. We therefore urge that you refuse to expand this program-its benefits, the duration thereof, and the standards therefore-beyond the bounds contained in H.R. 15119 as passed by the House.

STATEMENT OF HERRICK S. ROTH, PRESIDENT, ON BEHALF OF THE COLORADO LABOR COUNCIL, AFL-CIO

Colorado has often been the object of special attention when it comes to both the administration and the standards set for its program of unemployment insurance and unemployment compensation payments.

Part of this attention has been attracted because the Department of Employment for our State has had the same administrator since its establishment in the 1930's and since he has been considered both a strong and conservative executive, even as he has dealt with the State Legislature in establishing the guidelines for unemployment compensation benefits and coverage.

The maker of this statement has had twenty years of intimate involvement in both labor's position on the entire program and the legislative program established on the state level. He has served for the greater part of that time in elected union positions; has served for the last four years on the Governor's Advisory Council for the State Department of Employment; and has served as a member of the House for two years and four years as a member of the Senate of the Colorado General Assembly with membership on committees in both Houses that have dealt with this area of concern.

The Sixth Biennial Convention of the Colorado Labor Council, AFL-CIO, held in early May of this year, endorsed unanimously the original proposal of Senator Eugene McCarthy's S. 1991. We did this because our members and the offices of our Council have been deeply involved in recent years in dealing with the problems of entitlement of benefits under our Colorado law. All of this experience has simply underscored what we have basically believed for at least the last two decades; namely, that unemployment benefits and coverage are national problems that deserve the same kind of minimum federal attention already provided by law in fields relating to other social security areas such as old age, survivors and disability programs.

At the moment, Colorado has relatively decent monitory payment for the unemployed worker, provided that he can establish eligibility. This is not the easiest thing in the world to do, however. For instance, since 1963, Colorado has had an award system unlike any other state in which limited optional or discriminatory judgments based on the facts of an individual's case are available.

We have a fixed benefit system that arbitrarily rules out many who should be otherwise eligible simply by fixed determinations written in the law. Some of these are set at "50% Awards" and others at "No Awards." In a sense, this is a substitute for penalty waiting periods which, as you know, vary in length in different states.

We use this point to illustrate the fact that political pressures from time to time make unusual and sometimes unrealistic changes in laws affecting workers, even though the workers continue to find the business of being out of work the same personal and economic problem for themselves no matter what their states of residence.

Other examples could be quoted at length, including the manner in which the judgment of an employment office about eligibility can be appealed, the nature of coverage of seasonal workers, the kind of employment tax placed upon the covered employer, the number of employees required for an employer to be covered by law, the length of the benefit period available to the employee, the amount of wages and duration of wage payments that are to be used for wage credits, the percentage of earned wage that is to be used as the base for payment of compensation benefits, the relationship of the number of dependents which a worker has to the amount of the benefit paid, the additional benefit payable because of continuity of service with a single employer, and the like. In brief, no matter where a worker works to earn his benefit of coverage for the payment of unemployment compensation, he is in a highly mobile work force and needs to know that certain basic standards will prevail from state to state as he seeks to find work best suited for himself and his community. He needs this assurance not simply because of the possibility of layoff from work which he has primarily trained himself to do and perhaps has actually done all the years, but he needs it so that he can even quit work to seek a better job with the full knowledge that some protection exists for him in case the better job ceases in due time. The variations among the states are so great in this one area alone that the federal benefit standard is needed to insure incentive as well as security as the worker tries to find the job suited to his skill or is given the time to train himself for the new job markets available.

We subscribe to the AFL-CIO standards because they are basic, decent and yet minimal. We will not, therefore, repeat them here except to say that any worker out of work needs to know, if at all possible, that his full wage credits on jobs previously held are being applied to a benefit standard that the benefit standard must be no less than a basic minimum standard of living for him and his family as he makes himself available for new work, and that the duration of this benefit must be sufficient for both him and the business community to place himself in the best possible work fitting his abilities.

If S. 1991 does become law, as we believe it should, then our feeling is that a considerably lesser number of unemployed workers in our own state will be properly entitled to payments which they do not now receive. This, in turn, will provide for them better opportunities to seek, train for, and find employment, while at the same time removing them from private or public charitable assistance paid for on a general tax base that serves both the worker and the community less well than the federal benefit standard program for unemploy ment would provide.

We urge this important reform.

STATEMENT OF THOMAS T. SNEDDON ON BEHALF OF THE NATIONAL LUMBER AND BUILDING MATERIAL DEALERS ASSOCIATION

I am Thomas T. Sneddon, Executive Vice President of the National Lumber and Building Material Dealers Association, 302 Ring Building, Washington, D.C. The Association of 13,000 member firms is the sole national representative for the building materials distribution industry which accounts for over seven billion dollars in building materials annually.

Our interest in the current Unemployment Compensation Bill S. 1991, is in general opposition. We urge the Committee to accept and adopt the provisions of the House of Representatives Bill H.R. 15119.

Being mindful of the vast changes in the incidents of our post-depression economy, we believe an updating of the Unemployment Compensation Program is appropriate, particularly at a time of a relatively low unemployment rate. The Committee is in a position to objectively anticipate the assistance needs of the responsible individuals who find themselves unemployed through no fault of their own, that is, those individuals for whom the original programs were conceived.

Recognition of the need for change does not, however, permit us to discount the need for financial responsibility in advocating change. Attempts to convert a necessary assistance program into an extended welfare plan are obtuse to the motives which prompted the program initially. S. 1991 is just such an attempt. The House of Representatives repelled the effort and in the alternative passed a reasonably sound proposal incorporating a liberal expansion of coverage and a long needed provision for Judicial Review. More importantly, they reindorsed the need for State administration of the existing programs and rejected the unacceptable demands for a Federal Benefits Standard.

Rather than steadfastly opposing any change in the Unemployment Programs, we believe the Senate Committee would render both business and responsible members of the labor and white collar force a positive service by rejecting S. 1991, and in the alternative, adopting provisions comparable to those in the House approved bill. Recognizing the stimulus value and need of incentives to all, we feel the retention of experience rating, the perpetuation of State and not Federal Administration of the program, and the non-interference with assistance payments which certain proposals would attempt to convert to rewards is a necessary and equitable compromise between the proponents of unlimited assistance and the financial realism of the business community.

We find most of the provisions of House bill to be acceptable, however, as spokesman for a distribution industry, primarily composed of small businessmen, we must object to the increases in the tax base, both under S. 1991 and H.R. 15119. We believe the necessary funds for financing the new provisions can be raised by an increase in the tax rate alone rather than expanding both the rate and the wage base. Should the Committee conclude that an increased tax rate and wage base is essential to the economic soundness of the unemployment programs, we urge a less aggressive escalation of the wage base. Specifically, from the present $3,000 base to $3,400 in 1969, and $3,800 in 1972. A gradual increase will be more easily managed in the competitive economics of the building materials distribution industry. As employers, our members often find new or broadened taxes to be cumbersome to absorb in the marginal profit structure. This is due to the erratic cyclical nature of our particular industry. Specifically, the present decline in the homebuilding and related industries, such as the dealers, has critically affected many of our members. Some of them would be unable to manage the added tax burden created by bills such as S. 1991. The Senate's acceptance of the House measure with our recommended change in the wage base would ease the burden on the members of our industry and achieve more rational objectives than those sought in S. 1991.

AMERICAN COUNCIL ON EDUCATION,
Washington, D.C., July 21, 1966.

Hon. RUSSELL B. LONG,

Chairman, Committee on Finance,
U.S. Senate,

Washington, D.O.

DEAR SENATOR LONG: Although the American Council on Education did not ask to testify before your committee in connection with H.R. 15119, we hope very much that the enclosed statement may be made a part of the record. Institutions of higher education, coming as they will for the first time under the provisions of the Unemployment Compensation Act, are naturally concerned at the impact this will have on institutional finances.

We are in sympathy with the objective of providing economic security for those who need it, and we are, therefore, in general support of the bill. We do believe, however, that non-profit institutions are sufficiently different from profit institutions as to warrant special treatment. In passing the bill the House of Representatives concurred with most of our suggestions. We shall be very grateful for any consideration your committee can give to our additional requests. Sincerely yours,

JOHN F. MORSE, Director of the Commission.

AMERICAN COUNCIL ON EDUCATION-STATEMENT ON H.R. 15119

The American Council on Education wishes to signify its general support of H.R. 15119, as opposed to those provisions of H.R. 8282 which pertained to institutions of higher education. The Council, a voluntary, non-Governmental body, is the principal coordinating agency for higher education in the United States. It has a membership of 1194 colleges and universities and 230 education organizations.

We are not opposed to the concept that workers employed by non-profit institutions should be accorded the same degree of employment security as they would enjoy if they worked for profit enterprise. We would argue, however, that employment in non-profit enterprise is far more stable than in profit enterprise and, therefore, that special consideration should be given to our situation.

Specifically, H.R. 15119 recognizes the following special considerations:

(a) Institutions of higher education are exempt from the .55 per cent Federal tax.

(b) Those engaged in the capacity of "instructional, research, or principal administrative capacity" are excluded from coverage.

(c) Students employed by their institutions are excluded from coverage. (d) Institutions will be allowed the option of reimbursing the State for benefits paid out on behalf of their former employees instead of paying the State unemployment insurance contribution.

We have three concerns that are not taken into account in H.R. 15119 and we hope that they may be given the committee's earnest consideration:

1. We would strongly urge that student spouses be exempt from coverage. The reason for this request is a purely practical one. In general, educational institutions go out of their way, often at the sacrifice of considerable efficiency, to employ student wives simply as a way of providing additional student financial aid. Such employment is, of course, temporary and when the student graduates and moves on to his career elsewhere, his wife goes with him and new employees must be found and trained. But we have believed that the assistance provided in this way to students is so important that it outweighs all disadvantages.

There seems to us a strong probability that many student wives may claim unemployment compensation after leaving college employment and that these claims may be upheld. This could be true even if they had no intention of continuing their employment after their husbands had received their degrees. If this were the case, we fear that our present policies would be prohibitively expensive and that they would have to be abandoned. Then we would be faced with the problem of finding new sources of funds for student aid or see large numbers of students discontinue their education.

2. We would urge that all administrative and professional personnel be exempt from coverage. The phrase contained in H.R. 15119, which exempts principal administrative personnel, unless far more clearly defined, may lead to great confusion in shaping State legislation.

3. We would urge that colleges and universities not be charged for benefits paid for unemployment not directly caused by these institutions. We strongly endorse the provision in Section 104 (b) which provides a form of self-insurance for non-profit organizations. However, under the bill as it is now written, such institutions would be liable for the payment of benefits to former employees who might voluntarily terminate employment in order to accept new employment in profit enterprise and then involuntarily be released from this new employment. We believe the House intended to relieve institutions of higher education of the responsibility for compensating for unemployment not attributable to them. If this is the case, we believe the Act should stipulate that such institutions are responsible only for compensation benefits paid as a result of the direct actions of the non-profit employer.

Re: unemployment tax legislation.

Hon. RUSSELL B. LONG,

U.S. Senate,

Washington, D.C.

AMERICAN ELECTRIC POWER CO., INC.,
New York, N.Y., July 20, 1966-

DEAR SENATOR LONG: The Finance Committee is now holding hearings on two unemployment tax bills, H.R. 15119, recently passed by the House of Representatives, and S. 1991. I am writing you in behalf of the American Electric Power System companies to urge that H.R. 15119 be the vehicle for the new law rather than S. 1991, and in particular, that "experience rating" should be retained.

S. 1991 is similar to H.R. 8282, introduced in May 1965, for which, after lengthy hearings and careful consideration, the Ways and Means Committee substituted H.R. 15119. The House passed H.R. 15119 by an overwhelming vote. H.R. 15119 represents a realistic overhauling, the first since the 1930's, of the federal provisions relating to the combined federal-state unemployment taxes. This bill raises, in future years, both the federal tax rate and the maximum taxable wage base (which will lead to higher state wage bases); extends coverage to additional workers; provides for an extended benefit period, up to 13

weeks, in time of recession, with the federal and state government each paying one-half; and provides, for the first time, for court review of adverse decisions by the Secretary of Labor as to whether a state unemployment compensation system conforms to the requirements of federal law.

Most important, H.R. 15119, unlike H.R. 8282 and S. 1991, would not tamper with the present long-established system of "experience rating", under which, by virtue of Sections 3302(b) and 3303(a)(1) of the Internal Revenue Code, an employer may receive credit for state tax against the federal tax up to a maximum 2.7% rate of state tax, even though he pays state tax at a "reduced" rate less than 2.7%. This "additional credit" is now allowable only if the "reduced" state rate paid by the employer is due solely to his good record of employment stability. Experience rating is not only fair and equitable, but a strong financial incentive for employers to make every effort to maintain stable employment, and to keep layoffs and terminations of employment to a minimum. I attach a copy of a July 28, 1965 letter which I wrote to The Honorable Wilbur D. Mills, Chairman of the Ways and Means Committee, when that Committee was considering H.R. 8282, urging, as I am doing now, the retention of experience rating.

I am sending a copy of my letter to you, with its attachment, to all members of the Finance Committee.

Sincerely yours,

DONALD C. Cook.

Re H.R. 8282, unemployment taxes.

Hon. WILBUR D. MILLS,

House of Representatives,
Washington, D.C.

AMERICAN ELECTRIC POWER CO., INC.,
New York, N.Y., July 28, 1965.

DEAR MR. MILLS: I am writing in behalf of the American Electric Power System companies to urge the deletion of those provisions of H.R. 8282, the unemployment tax bill on which the Ways and Means Committee will shortly hold hearings, which would eliminate or reduce experience rating as a factor in determining the rate of state unemployment tax paid by an employer.

Unemployment taxes are imposed to provide, through regular contributions, the moneys to pay benefits to individuals who are currently unemployed and to create and maintain a reserve from which payments may be made to those who become unemployed in the future. The moneys for this purpose are obtained through taxes on employers. An employer has up to now been paying state unemployment taxes at rates determined by the amounts of unemployment compensation, in relation to the size of his taxable payroll, paid in the past to his former employees, which in turn have formed the basis for estimating the future drain on the state fund which might be caused by future terminations of employment with him. An underlying concept of unemployment compensation laws has been that to the extent feasible, an employer is to furnish, in a regular and systematic manner, the moneys for paying benefits to individuals who worked for him before they became unemployed.

Consonant with this concept, unemployment laws have always given recognition to the principle of experience rating-that the rate of unemployment tax paid by a particular employer should reflect his past and current record of employment stability. This principle recognizes that an employer who has a heavy turnover of employees, which gives rise to large relative unemployment compensation payments to individuals who no longer work for him, pays a higher tax rate, as a per cent of taxable wages, than an employer who, again on a relative basis, has few terminations of employment and whose former employees therefore -draw little unemployment compensation and make a small drain on the state fund. This is a salutary and just principle and operates to encourage stability of employment.

Present federal law not only recognizes but emphasizes the meritorious nature and the importance of experience rating. Section 3302 (b) of the Internal Revenue Code allows "additional credit" against federal tax for state tax up to a maximum 2.7% state rate, even though the employer actually pays a "reduced" (lower) state rate, provided the state law is certified by the Secretary of Labor.

1 Only in a small minority of states do employees also contribute to the fund. American Electric Power System employees do not pay unemployment tax in any state.

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