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study has been made of the impact of the social security tax upon employers. For each one-half of 1 percent increase in this tax, hotel management faces a budget of betweeen $4 million and $5 million in annual payroll cost. This is irrespective of any increase in the base.
Year after year, spokesmen for one national labor union have come before your committee and asked that the tip income of service employees in hotels and restaurants be subjected to social security tax. We have always been obliged to oppose this because of the fact that the employer has no way of determining the precise income which waiters, waitresses, bartenders, bellboys, maids, and other service employees receive from the guests.
We would like to suggest that the committee consider amending the Social Security Act to provide that tips or gratuities shall not be classified as wages, for purposes of the Federal Insurance Contributions Act. Or, the law could be amended to provide that employees, a part of whose income is in the form of gratuities, could elect to file as self-employed, for the purpose of declaring tip income and paying the social security tax thereon. We attach exhibit A, repre senting suggested language by which one or both of these proposals could be included in the basic law.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 3121(a) of the Internal Revenue Code of 1954 (relating to definition of wages for purposes of the Federal Insurance Contributions Act) is amended by striking out "or" at the end of paragraph (9), by striking out the period at the end of paragraph (10) and inserting in lieu thereof (s; or”, and by adding after paragraph (10) the following new paragraph:
“(11) any tip or gratuity (as defined in section 3401(f) received by an employee directly or indirectly from the customer of the employer." SEC. 2. Section 3306(b) of such Code (relating to definition of wages for purposes of the Federal Unemployment Tax Act) is amended by striking out the period at the end of paragraph (8) and inserting in lieu thereof *; or", and by adding after paragraph (8) the following new paragraph :
“(9) any tip or gratuity (as defined in section 3401 (f) received by an employee directly or indirectly from the customer of the employer." Sec. 3. (a) Section 3401(a) of such Code (relating to definition of wages for purposes of collection of income tax at source on wages) is amended by striking out the period at the end of paragraph (12) and inserting in lieu thereof "; or", and by adding after paragraph (12) the following new paragraph:
"(13) directly or indirectly to an employee by the customer of the employer as a tip or gratuity." (b) Section 3401 of such Code (relating to definitions) is amended by adding at the end thereof the following new subsection :
“(f) Tip or Gratuity.-For purposes of this chapter and chapters 21 and 23, the term 'tip or gratuity' means any payment
"(1) made by a customer of the employer to an employee or group of employees in connection with service performed or to be performed for such customer, or
“(2) which the customer makes to the employer for the express purpose of distributing the same to employees for service performed or to be per
formed for such customer.” Sec. 4. (a) Section 1402(b) of such Code (relating to definition of the term ‘self employment income') is amended by striking the first semicolon and inserting the following: ", or tips and gratuities received by an employee directly or indirectly from the customer of the employer;"
(b) Section 1402 of such Code (relating to definitions) is amended by adding at the end thereof the following new subsection:
“(e) TIP OR GRATUITY.-For the purposes of this chapter, the term 'tip' and the term 'gratuity' shall have the same meaning as when used in chapters 21 and 23."
Sec. 5. The amendments made by this Act shall apply with respect to payments made by customers on or after the first day of the first month which begins more than ten days after the date of the enactment of this Act.
Washington, D.O., July 13, 1959. Re Grange opposition to H.R. 4700. Mr. WILBUR D. MILLS, Chairman, House Ways and Means Committee, The Capitol, Washington, D.C.
DEAR MR. CHAIRMAN : The delegate body of the National Grange, meeting in annual session, in recent years has consistently voiced its opposition to the idea of compulsory health insurance, whether plans to provide that insurance covered all U.S. citizens or a segment of our population, as is the case of H.R. 4700. This bill, as we understand it, is designed to amend the Social Security Act and the national revenue code so as to provide insurance against the cost of hospital, nursing home, and surgical service for persons eligible for old-age and survivors insurance benefits.
This organization is fully aware of the health problems of the age group of people falling within the area of eligibility for old-age and survivors insurance benefits under our present social security law. It is the position of this organization, however, that these problems can best be met and solved by voluntary plans, which are more in keeping with our traditional manner of making progress and which have already chalked up an amazing record of progress in the field of health.
You and the members of your committee should know that this organization has exerted a significant amount of its resources in the field of developing adequate voluntary insurance programs for hospital and medical care for all people; including those over 65 years of age. We have further devoted a considerable amount of effort toward encouraging not only Grange members but all rural Americans to enroll in these voluntary plans.
In short, it is our hope that you and the members of your committee will see fit to oppose H.R. 4700. Respectfully yours,
HERSCHEL D. NEWSOM, Master.
NATIONAL FEDERATION OF INDEPENDENT BUSINESS,
Washington, D.C., July 13, 1959. Subject: H.R. 4700. Hon. WILBUR MILLS, Chairman, House Ways and Means Committee, House Office Bailding, Washington, D.C.
DEAR MR. CHAIRMAN: Repeated polls by the federation of its nationwide independent business and professional men members, the largest directly supporting membership of any business-professional organization in the Nation, indicate their opposition to H.R. 4700, the bill by Representative Aime J. Forand, of Rhode Island, to amend the Social Security Act to provide insurance for the cost of hospital, nursing home, and surgical services for persons eligible for oldage and survivors insurance benefits.
All indications are their opposition to this legislation is based on two factors :
1. The threatened tax increases, and 2, fear that the bill may be on opening wedge for socialization of medicine.
Here's the record of the polls taken by the federation of its membership, during the past 3 years, on H.R. 4700 and related bills:
1. Mandate No. 232 (August 1957), members polled on H.R. 7669, increased social security tax; increase the maximum amount of income on which businessmen and individuals must pay social security taxes, from $4,200 to $6,200 yearly (Representative Dingell, Michigan). Results of this poll: 21 percent for ; 76 percent against ; 3 percent no vote.
2. Mandate No. 237 (March 1958), members polled on H.R. 9467, increase social security taxes so that Government can pay up to 60 days' hospital care for folks living on old-age pensions (Representative Forand, Rhode Island). Results of this poll : 14 percent for ; 84 percent against; 2 percent no vote.
3. Mandate No. 248 (May 1959), members polled on H.R. 4700, increase social security taxes to pay medical expenses; increase social security taxes paid by workers and businessmen in order to expand benefits to include hospital and medical expenses for retired persons (Representative Forand, of Rhode Island). Results of this poll : 20 percent for, 78 percent against, 2 percent no vote.
Following facts are of interest in connection with the foregoing polls. These percentages are based on counts made of opinions expressed by federation members on personal, signed ballots which they forwarded, through their business or professional men federation district chairmen, to their Congressmen at Washington, D.C. The opinions expressed on each of these ballots were the personal feelings of each voting federation member, arrived at in the privacy of their offices or homes, without influence one way or the other by the federation, and with no official or employee of the federation touching or seeing ballots on their way from members to their Congressmen, and with each member limited to one ballot.
It will further interest you to know that the federation is today, as it has been over each of the past 15 years, the only organization of its kind conducting these small, independent business and professional man surveys, with actual, signed ballots delivered regularly and directly by the independents covered to their Congressmen.
Will you kindly make the foregoing information available to the members of your committee studying H.R. 4700, and make this letter a part of the record of your hearings on this legislation? Sincerely,
GEORGE J. BURGER, Vice President.
RESOLUTION OF COUNCIL OF JEWISH FEDERATIONS AND WELFARE FUNDS, INC., ON
FINANCING HEALTH SERVICES FOR THE AGED
Resolution unanimously adopted by CJFWF board of directors March 15, 1959. The board of directors of the Council of Jewish Federations and welfare funds approves in principle the use of the mechanism of the old-age and survivors insurance program for financing an expanded program of health services for persons 65 years and over.
Provision of health services to the aged by Jewish institutions has become a matter of growing concern. Increased costs of medical care and the increased demand for these services by the aged place great strains upon the physical resources of Jewish institutions and increase institutional deficits substantially.
On March 16, 1958, council board of directors adopted the following motion : "Upon motion made, duly seconded and carried, the board approved transmittal of a communication to the House Ways and Means Committee recommending a public hearing on the broadening of the social security program to include medical, hospital, and nursing home benefits. The president was authorized to appoint a council representative to participate in such a hearing."
The health services planning committee on February 15, 1959, recommended that the council board of directors approve in principle the use of the mechanism of OASI for financing an expanded program of health services for persons 65 and
Data developed by the health services coordination study reveal that
1. On the average, 8 percent of Jewish general hospital patients on a given day have been hospitalized longer than 30 days. Half of these patients are over 65 years of age and most of the remainder between 60 and 65 years.
2. The proportion of aged receiving short-term hospital care cannot be stated with accuracy. It is known that the hospital admission rate per 1,000 persons over 65 years of age is double the rate of younger persons.
3. The long-term institutions under Jewish auspices, including homes for the aged, have approximately one-half of their residents cared for in infirmary or hospital units. The one-half residing in residential units also require continuing medical and nursing care.
4. The provision of extended medical care in Jewish homes for the aged accounts for the bulk of the increased cost in operations and the increased deficits.
5. The financial capacity of the aged to finance their own hospital and medical care is limited. Eighty percent of the residents of the Jewish homes for the aged are dependent primarily upon public assistance grants or small OASI benefits. Among all general hospital patients staying 30 days or longer, over half have family incomes of less than $3,000 a year. In the
population at large, less than 40 percent of all persons under 65 are protected by voluntary health insurance primarily because of limitations in voluntary insurance contracts and limitations in income.
THE CURRENT LEGISLATIVE SITUATION
The Federal Congress will this year consider several proposals to provide expanded health benefits for the aged. There is wide belief that major legislation will be enacted this year or in 1960. The exact terms of this legislation will be determined by hearings and discussions now going on among interested organizations.
Several alternatives are being currently debated in order to meet the situation. 1. Extension of OASI. One proposal would
(a) Pay for 60 days of hospital care annually (including all customary services provided bed patients, except attending doctors service).
(6) Pay for 60 days of skilled nursing home care following hospitalization; or a combination of hospital and nursing home care not to exceed 120 days in a 12-month period.
(c) Pay for surgical services in the hospital (not for other physicians services).
(d) Finance the costs by an increase in the social security contributions rate of one-fourth of 1 percent each by employers and employees. 2. Provision of governmental subsidies to voluntary insurance companies to encourage their extension of coverage to the aged.
3. Reliance upon voluntary insurance extension without subsidy; enlargement of public relief medical services for the aged unable to maintain voluntary insurance.
Various organizations have begun to develop their choices among these alternatives. The position of each organization mentioned below is usually a complex of several factors. The essential position of each, however, can be simplified as follows:
1. Opponents of OASI extension.-American Medical Association and commercial insurance companies are vigorously opposed. In general, they prefer that voluntary insurance be given further time to extend coverage to the aged through private purchase of insurance. They believe that this proposal is a first step in the direction of socialized medicine. ('oncern is also expressed that there will be Federal control of medical and hospital practice and that provision of hospital benefits to the aged will lead ultimately to universal compulsory insurance. Some opponents believe that such insurance will expose hospitals to uncontrollable demands for admissions they cannot absorb; others believe the costs cannot be controlled.
2. Proponents of OASI extension.--The American Nursing Association, the American Public Welfare Association, the AFL-CIO, the National Association of Social Workers, the National Consumers League, among others, have expressed vigorous support. For example, the board of directors of the American Public Welfare Association has resolved that- "Health costs of old-age, survivors, and disability insurance beneficiaries should be financed through the OASDI program. Arrangements for achieving this objective should take into account the priority needs of the groups to be served ; availability of facilities, personnel, and services; and protection and encouragement of high quality of care, including the organization of health and related services to effect appropriate utilization of services and facilities."
The position of these organizations generally stresses that the aged have inadequate economic resources to purchase medical coverage universally, and that their need for adequate medical care has been comprehensively established. Since it has also been established that they do not have adequate resources, they consider it a social responsibility to assure a minimum meeting of medical needs. The problem cannot be absorbed by private philanthropic resources since the costs are overwhelming. The OASI extension provides for a simple method with minimum controls.
The proposed legislation is fundamentally a means for financing costs of the program. For example, the proponents point out that in one plan (the Forand bill, H.R. 4700), the program would be administered by the Secretary of Health, Education, and Welfare. The OASI system would use its existing recordkeeping system to certify eligibility and to issue insurance cards. Agreements would be reached with providers of service, or their authorized representatives, covering payment rates. Private nonprofit organizations could be used where their use would contribute to effective and economical administration. There would be free patient choice of physician and of qualified institution.
ELEMENTS OF PROGRAM NEEDED
In order to effectively carry out the board resolution, certain features of a program of health services need to be developed. The following are illustrations of how the intent of the resolution could be advanced in legislation :
1. As a minimum, service benefits should provide for hospitalization in a general or chronic disease hospital for a fixed number of days per year (possibly 60 or 90 days).
2. Some provision should be included for care outside of hospitals but this extension should in no sense jeopardize adoption of item 1. Steps can be taken to provide care outside of hospitals in any of the following ways:
(a) Payment for care in nursing homes for a fixed number of days following hospitalization. (6) Payment for nursing services in the home of the patient.
(c) Provision for a demonstration and research grants program by which a certain portion of funds collected would be allocated to support experimental and demonstration projects to test out more effective and less costly ways of providing necessary care through the combined use of general hos
pital, long-term institution, and organized home medical care. 3. Benefits extended to nursing homes should be accompanied by an imrpovement in standards of care. This can be accomplished in two ways:
(a) The Federal law can require the Federal agency responsible for its administration to assist the several States to improve the standards of skilled nursing home services through State licensing laws and enforcement of their provisions.
(0) The construction of public and nonprofit nursing homes can be encouraged through widest use of grant-in-aid under existing construction
programs. 4. If physicians services are to be provided for in final legislation, both surgical and nonsurgical services should be included.
HOUSE OF REPRESENTATIVES,
Washington, D.C., July 13, 1959. Hon. WILBUR D. MILLS, Chairman, Houses Committee on Ways and Means, House of Representatives, Washington, D.C.
DEAR CHAIRMAN MILLS: I am taking the liberty of enclosing a letter which I have received from one of my constituents, Mr. Lonnie Simpson, Hutchinson, Kans., voicing his opposition to the provisions of H.R. 4700.
Will you kindly include this correspondence in the hearings to be conducted by you on this measure? With cordial good wishes, I am, Sincerely yours,
J. FLOYD BREEDING,
Member of Congress.
SIMPSON OLIVER IMPLEMENT Co.,
South Hutchinson, Hutchinson, Kans., July 9, 1959. Congressman J. FLOYD BREEDING, Hutchinson, Kans
DEAR FLOYD: Having not had a chance to visit with you for some time, I will have to drop you a line to convey to you our feelings regarding some of the expected legislation you will be called upon to vote upon before too long a time.
As you know, our type of business operation has changed considerably since I first met you in our store when you were first elected to Congress. In our industry, the retail end of the farm machinery business is badly demoralized and good independent retail operators of farm machinery stores are fast becoming a thing of the past. Knowing that your No. 1 headache in your district is the economic condition of the farmer and knowing that our existence depends