Hotel on Saturday night, when he goes home to talk to his wife about the week's earnings, talks not only about the $25 or $30 that the hotel gives him, he talks about the earnings he has picked up in cash tips, and this is part of the income in this business, and that is what we are talking about.

Senator DOUGLAS. I see there has been a sort of schizophrenia on both sides on this tip question.

Mr. ANDERSON. Not in the 4 years that I have been in the business, Senator. We have agreed to a figure

Senator DOUGLAS. Not with you, Mr. Anderson, but I have heard this argument. The employers will want to have tips included so far as wage standards are concerned, but are not very anxious to have them included in social security.

But I have talked to people from the wage earners who would like to have these included under social security, but not considered with respect to wage standards.

Now, you are taking the consistent attitude that they should be included for both purposes in a uniform definition.

Mr. ANDERSON. Yes, sir; and we so testified before the House Labor Committee 2 years ago, and we would take that position now; yes, sir. Senator DOUGLAS. That is the official position of the union?

Mr. ANDERSON. Yes, sir; it is.

Senator DOUGLAS. It is not only your position but the official position of the union.

Mr. ANDERSON. The testimony was actually given by the general counsel of our union directly representing the international union, as I do myself.

Senator DOUGLAS. Very good. This may clear up a lot of difficulties if you have uniformity both for wage standards and for social security provisions.

Now, have you talked with the social security people as to whether these reports ought to be monthly or quarterly?

Mr. ANDERSON. Quarterly.

Senator DOUGLAS. And whether this presents unusual administrative difficulties.

Mr. ANDERSON. Senator, I think it is a fair statement to say that this bill is written around the administrative challenges of the social security system; that this bill had to be written around the IBM computer complexes at their headquarters in Baltimore; and, yes, the answer is yes, we have not only cleared this with social security, we have met every requirement that they gave us.

Senator DOUGLAS. The tip feature would be the same, fundamentally the same, as the form for the self-employed workers.

Mr. ANDERSON. With some variation, yes, because there are features of tipped employment now existent which are in the control of the employer. For example, if you sign a tip on your American Express credit card or if you sign a tip on your hotel bill or if you engage a banquet at the Statler Hotel, part of your chit, part of the billing, that you receive covers service or tips for the employees. This is all within the control the employer. So that the man's reporting of tipped earnings will include not only the cash earnings that he declares, but also the other earnings that are actually in the control of the employer, so it is not exactly on a self-employed situation.

Senator DOUGLAS. That is, the 10 percent or 15 percent would be included, too?

Mr. ANDERSON. In this respect it differs from a self-employed situation.

Senator DOUGLAS. Well, thank you very much for very pertinent testimony.

Mr. ANDERSON. Thank you.

Senator DOUGLAS. The final witness this morning is Mr. James A. Mann, of the Illinois State Chamber of Commerce.

I am very glad to welcome you, Mr. Mann.

STATEMENT OF JAMES A. MANN, CHAIRMAN, SOCIAL SECURITY COMMITTEE, ILLINOIS STATE CHAMBER OF COMMERCE

Mr. MANN. Thank you, Senator Douglas. It is nice to have a Senator from Illinois present here today.

My name is James A. Mann. I am personnel manager for WymanGordon Co., Ingalls-Shepard Division, Harvey, Ill., producers of drop forgings for the automotive, aircraft, truck and tractor industries. Currently, I am chairman of the Social Security Committee of the Illinois State Chamber of Commerce. At this time, I wish to briefly highlight certain portions of a statement I have previously prepared and submitted of your consideration.

Senator DOUGLAS. Your prepared statement will be inserted in the record following your oral testimony.

Mr. Mann, during past years, the Illinois State chamber has supported expansion and improvement of social security but has stressed that this essentially is a tax program wherein today's workers pay for the benefits of today's retired workers. As an organization of businessmen, we have been concerned with the costs of these programs, both present and future. I am sure that in your consideration of H.R. 6675 you necessarily will view this legislation from the point of view of taxes and costs as well as benefits essential to provide protection to our elderly.

In view of our concern over the costs of the social security program itself, we have questioned the incorporation of medical and hospital care for the elderly through a payroll tax in the social security system. It has been, and still is, our contention that providing hospital and medical care for the aged on the basis of "rights" under social security will jeopardize the social security program because of the high costs that will occur.

Senator DOUGLAS. You will forgive me, Mr. Mann, but you know that actuarially and financially the funds for hospital and medical care and, indeed, for surgical and medical care, are to be isolated from the general social security fund.

Mr. MANN. Yes, sir.

Senator DOUGLAS. Proceed.

Mr. MANN. I am sure you will fully consider the costs in the present bill as well as possible future costs through demands that will be made for further expansion of the medicare program. Some of these demands you already have received; for example, additional medical and surgical benefits beyond the scope of H.R. 6675 and the elimination of deductibles in hospital care.

It is the Illinois State chamber's firm position that medical and hospital care must be provided to our needy aged but it should be done on the basis of Federal-State cooperation with administration at the State and local levels. We have continually supported this type of protection and we are hopeful that your committee will approve provisions in H.R. 6675 implementing what is known as the Kerr-Mills program, providing medical care for the indigent.

In view of the volume of testimony you have received, I do not wish to burden you by restraining the many issues brought to your attention. However, there are three matters of concern which I specifically wish to point out.

When the Social Security Act was amended by Congress in 1956 providing disability benefits, Congress recognized that these new Federal payments would overlap with wage replacement benefits provided under workmen's compensation. This law stipulated that the social security disability payments would be offset or reduced by the amount of benefits paid under workmen's compensation in the various States. However, we believe an error was made when this offset provision was deleted from the Social Security Act in 1958. Section 303 of H.R. 6675 compounds this error by in effect allowing additional thousands of workers a double package of workmen's compensation and social security disability benefits for short-term temporary disabilities.

As explained in an example in my previous statement, under section 303 it will be possible in Illinois for an injured workman with two children to receive double monthly benefits of approximately $551— tax free-as compared to his previous wage of $400 a month.

We strongly feel that your committee should provide that social security disability benefits be offset by workmen's compensation payments in the various States and further that the present requirement that a worker's disability must be expected to result in death or to be of long continued and indefinite duration be maintained.

The Illinois State Chamber of Commerce believes that the individual States should finance any necessary expansion of public assistance programs for the needy aged, blind, disabled, and families with dependent children without further increases in Federal matching formulas. If Congress determines, however, that increased Federal payments are necessary, we wish to point out our concern regarding various provisions in H.R. 6675.

In discussions with the Illinois Department of Public Aid, we find that section 405 provides that a State will receive added Federal aid provided under title XIX and the added Federal aid for money payments provided in section 401 only to the extent that its total expenditures for medical assistance and money grants under the new system effective in 1966 exceed the average of its total expenditures for fiscal 1964 or 1965, whichever the State may select. This requirement will penalize States like Illinois whose cash grants, coupled with available resources, are considerably above the national average and provide a reasonable subsistence level now.

In order to correct this injustice, we suggest that the bill be amended to require that the Secretary of the Department of Health, Education, and Welfare establish a minimum standard for subsistence support which he shall use as a measure in determining whether or not a State shall be exempt from the section 405 formula for eligibility to receive

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increased matching for money payments. In addition, the bill should be amended to exempt from the "maintenance of State effort" formula those States who already provide for money payment recipients the five medical services which will be mandatory as of July 1967.

We wish to bring to your attention three requirements in proposed title XIX of the Social Security Act which we oppose.

First, we oppose the provision that only the spouse of adult recipients and parents for children under 21 shall be considered responsible relatives. We believe that children and parents of adult recipients, as now provided under title XVI, should be included under title XIX as responsible relatives. In addition, brothers and sisters living in the same home of AFDC and general assistance recipients should be required to provide support according to their ability.

Second, we oppose the provision prohibiting a lien upon the property of a recipient. Illinois statutes currently provide that the State may oppose a lien upon the real property of recipients of old age, blind, or disability assistance. Inasmuch as the homestead and contiguous real estate of an individual is exempt in determining eligibility for both money payments and medical assistance in Illinois, we believe that the State should not be prohibited from establishing a lien on the real property of recipients mentioned above. The prohibition of the lien provision, in effect, provides for the creation of an estate at public

expense.

The third requirement which concerns us would prohibit any durational residence requirement. Under all public assistance programs in Illinois, except the aid to medically indigent aged program under the Kerr-Mills Act, a person must reside in the State for 1 year as one of the conditions for eligibility. We support the 1-year residence requirement, and recommend that item (3) on page 136 of the bill be amended to authorize such a requirement for eligibility for medical assistance under programs covered by title XIX.

In discussions on H.R. 6675 with the Illinois Department of Public Aid, we share their concern that the "maintenance of State effort" formula appears to inject a philosophy into the public aid field that a State has to spend more to get more. We hope the Senate Finance Committee will remedy this situation by adopting the changes we have suggested.

In my previously prepared statement, I have explained our company's plans providing medical and hospital care to our retirees which they receive at no cost to them. These plans have been developed through collective bargaining agreements with five unions and we are particularly concerned as to the effect the medicare provisions in H.R. 6675 will have on these plans and future expansion of this nationwide voluntary insurance approach to the problem of providing assistance to retired workers. We trust your committee will give due consideration to this problem.

Frankly, it is difficult for me to forecast what effect the passage of medicare would have on future consideration of expansion of our program. In our situation, the combined employer-employee 1.6percent social security tax for medicare is an additional unnecessary cost to our company and to our employees.

Thank you for your courteous attention, Senator Douglas. (The prepared statement of Mr. Mann follows:)

STATEMENT OF JAMES A. MANN FOR THE ILLINOIS STATE CHAMBER OF COMMERCE

My name is James A. Mann. I am personnel manager for Wyman-Gordon Co., Ingalls-Shepard Division, Harvey, Ill., producers of drop forgings for the automotive, aircraft, truck, and tractor industries. Currently, I am chairman of the Social Security Committee of the Illinois State Chamber of Commerce.

This statement is presented on behalf of the Illinois State Chamber of Commerce, a statewide civic organization with a membership of about 20,000 businessmen, representing over 8,500 individual business enterprises in Illinois. Since 1952, I have been a member of the Illinois State Chamber's Social Security Committee which is comprised of 88 individuals, representing all types of business in our State, ranging from the self-employed to some of the Nation's largest corporations.

Our committee has constantly studied and reviewed matters relating to social security, and the policies which we recommend are approved by the State chamber's 70-member board of directors. Thus, my presentation and the viewpoints expressed in this statement, I am sure, are broadly representative of Illinois business.

COSTS AND TAXES

During past years, the Illinois State Chamber, through its social security committee, has supported expansion and improvement of social security but has stressed that this essentially is a tax program wherein today's workers pay for the benefits of today's retired workers. As an organization of businessmen, we have been concerned with the costs of these programs, both present and future. I am sure that in your consideration of H.R. 6675 you necessarily will view this legislation from the point of view of taxes and costs as well as benefits essential to provide protection to our elderly. With respect to taxes, they are taxes whether payroll, income, property, or excise and, of course, definitely affect our economy in a variety of ways. Let us just mention payroll taxes which are the concern of this legislation. They necessarily increase the costs of production when paid by the employer and the employee. In turn, such taxes contribute to an inflationary spiral throught an increase in the cost of living as they must become a part of the price paid for the goods and services produced.

Considering social security taxes alone, they can develop into what so often is termed "a vicious circle." An increased cost of living resulting from increased prices for goods and services will require an increase in benefits to the retired person. In turn, social security taxes, if we are to maintain today's adopted principles, will be increased with a further resulting increase in the cost of living. This appears to be recognized now in H.R. 6675 where benefits are increased to offset the increased cost of living. We recognize that such increases are necessary to maintain the basic purpose of the social security program. However, we cannot help but be concerned with the increased taxes that must accompany the increased benefits.

In view of our concern over the costs of the social security program itself, the State chamber has questioned the incorporation of a medical and hospital care for the elderly program through a payroll tax in the social security system. It has been, and still is, our contention that providing hospital and medical care for the aged on the basis of rights under social security will jeopardize the social security program because of the high cost that will occur.

By this time, your committee has analyzed these costs and I am sure you have similar concern. In past years, social security experts, including those in the Department of Health, Education, and Welfare, have warned that the social security tax should not exceed 10 percent of taxable payroll. However, as you well know, H.R. 6675 provides eventually for a 11.2 percent tax rate and that will be on an increased taxable wage base of $6,600. It is doubtful that anyone can forecast what the eventual tax will be with the inclusion of the medicare provisions.

We sincerely suggest that at this time, after you have determined whether or not it is wise to include medicare under social security, you resist all efforts to further increase the costs of what appears to be at least a $6 billion-a-year increase. Already, you have received suggestions to provide further medical and surgical benefits and to eliminate the deductibles in hospital care. Now, and in the future, there will be demands for increasing the maximum stay in hospitals, added payments for drugs and appliances, the lowering of the eligibility age for receiving benefits, and other provisions greatly increasing costs to staggering proportions. I am sure you are considering all these problems in your determinations as to the wisdom of placing medicare under social security.