natural, plain, ordinary, and commonly understood meaning, in the absence of any statutory or well established technical meaning, unless it is plain from the statute that a different meaning was intended, or unless such construction would defeat the manifest intention of the legislature."

Not only does the word "income" as used in the Federal income statutes, have a far different meaning from that contended by the Veterans' Administration, but it is respectfully submitted that such use as given by the Federal income statute is the common, ordinary use of the word.

In this connection see definition of the word as contained in 31 C. J. section 2 pages 397-399.

"B. As dependent on, or distinguished from, its source-1. In general. Whatever difficulty there may be about a precise and scientific definition of "income," it imports something entirely distinct from the principal or the source of its derivation; and it is used in common parlance and in law in contradistinction to "capital," "capital assets," "corpus," "invested capital,' "investment," and "property." Viewed from the source of its derivation, the word "income" may be defined to be that gain or profit which accrues, is derived, is gained, or proceeds from business, capital, commerce, investment of capital, labor, lands, occupations, professions, property of any kind or like."

See also Black's Law Dictionary, third edition, at page 499 to the same effect. Mr. DORN. Are there any questions?

Mr. CHRISTOPHER. I would like to ask you this question. If this lady sold this farm, are you telling us that the Veterans' Administration would consider the money that she received from the sale of this farm as income?

Mr. LANHAM. Yes, sir. That is what they told her and her attorney called the matter to my attention, which accounts for the fact that I introduced the bill. I have included with my written statement a brief statement of the law as we think it applies to this case.

Mr. CHRISTOPHER. Then what would really happen if she sold that farm before she could again draw another pension payment, she would have to live up to whatever the farm brought.

Mr. LANHAM. I am not sure whether it would have that effect or not or would apply for only the 1 year. I imagine it would apply only to the 1 year. It would be income for that 1 year.

Mr. CHRISTOPHER. In any case, it is a wrong interpretation because that is not income. That is capital.

Mr. LANHAM. That is right.

Mr. CHRISTOPHER. I would not object to the rent that was paid her off that farm being considered as income.

Mr. LANHAM. That is definitely income.

Mr. CHRISTOPHER. Or the profit from operating the farm, the net profit if she operated the farm herself. I would consider that income.

Mr. LANHAM. I would agree.

Mr. CHRISTOPHER. But if she sold it, it would be capital.

Mr. LANHAM. I think so.

Mr. TEAGUE of California. Is it not possible they meant the capital gain, the difference between the value under which she received it and the price at which she subsequently sold?

Mr. LANHAM. No. As I understand it, that was not her ruling. They ruled it was simply income. I hope the committee will investigate it carefully and take time to read the brief that is attached. Mr. DORN. Any further questions? We will try to get an answer

on that.

Mr. LANHAM. Thank you very much.

Mr. DORN. Mr. P. S. Hughes, of the Bureau of the Budget. Please identify yourself and give your full name.

STATEMENT OF PHILIP S. HUGHES, DEPUTY ASSISTANT DIRECTOR FOR LEGISLATIVE REFERENCE, BUREAU OF THE BUDGET

Mr. HUGHES. I am Philip S. Hughes, Deputy Assistant Director for Legislative Reference, Bureau of the Budget.

Mr. Chairman, I do not have a prepared statement.

Mr. DORN. Good.

Mr. HUGHES. The Bureau of the Budget has in the process of clearing the Veterans' Administration report communicated its view to the committee that we do not believe that either income from additional sources should be exempted or that there should be additional waivers permitted as proposed in some of these bills in determining which income should be considered for non-service-connected pension

purposes.

That briefly is our view. Our reasoning in reaching that position stems from the basic fact that the pension system is almost by definition a need system. As we see it, any income that is available to meet need should be considered in determining eligibility for pension. That is a rather brief statement but perhaps it will suffice.

Mr. DORN. Do you have any idea how much it will cost the Government if this type of legislation is passed?

Mr. HUGHES. I think it would be a very difficult thing to estimate. As far as I know, the Veterans' Administration has not made any comprehensive estimate. The problem as we see it is in part one of cost but also we believe it is in part one of principle. The adoption of certain further exemptions, to income or certain further waivers leads as we see it to the adoption of still further waivers or exemptions and there in turn can have a snowballing effect. Thus it would increase the cost of the program considerably and lead ultimately to the disregarding of the income limitation altogether, to the elimination of an

income test.

Mr. DORN. Are there any questions?

Mr. CHRISTOPHER. Mr. Hughes, supposing this widow that Judge Lanham told us about sold that little farm for exactly the value that the farm had when she inherited it. Would you want to consider the price she received for that farm as income for 1 year or more than 1 year or would you want to consider that as income?

Mr. HUGHES. I think the circumstances under which the proceeds of a sale would be considered as income would need to be considered almost case-by-case.

In the circumstance where there perhaps was a sale of one piece of property, purchase of another for a homesite, something of that sort, I think there is a real question as to whether that kind of a capital transaction, if we could call it that, need be considered as income.

In other circumstances where there is in fact a profit involved, where the result of the sale is to provide the widow or the veteran as the case may be with a substantial volume of capital assets, it would seem appropriate to me that at least some portion of those assets be considered as available to her in the form of income.

I think one possibility would be to capitalize the asset and consider a given percentage as income. Another possibility I think is the one which the Veterans' Administration follows now, as I understand it. They take cognizance of the proceeds of the sale only in the year in which the sale occurred. So if you have a $10,000 sale, the

effect of that is to make the recipient of the proceeds of the sale ineligible only in the year in which the transaction occurred. The assets continue to be available to her but not counted as income in the future. Mr. CHRISTOPHER. That is better than nothing and more liberal than the Veterans' Administration usually is. But still suppose this widow sold that farm and invested the money in Government bonds. Would you want to consider it all income or just the interest that those bonds paid?

Mr. HUGHES. I think under existing regulations-and it seems to me properly-the income interest is considered.

Mr. CHRISTOPHER. That is all, Mr. Chairman.

Mr. DORN. Are there any further questions? Thank you, Mr. Hughes.

The next witness is Mr. Lloyd Nelson of the General Accounting Office. Mr. Nelson, we are delighted to have you.

STATEMENT OF LLOYD A. NELSON, ASSOCIATE DIRECTOR, CIVIL ACCOUNTING AND AUDITING DIVISION; ACCOMPANIED BY CHARLES E. ECKERT, OFFICE OF LEGISLATIVE LIAISON; AND O. B. CARPENTER, OFFICE OF THE GENERAL COUNSEL, GENERAL ACCOUNTING OFFICE

Mr. DORN. Do you have a written statement?

Mr. NELSON. No, I do not. I have some notes I would like to talk from, but I do not have a prepared statement.

Mr. DORN. Just go right ahead.

Mr. NELSON. For the record, I am Lloyd A. Nelson, Associate Director of the Civil Accounting and Auditing Division, General Accounting Office. I have with me Mr. Carpenter from our General Counsel's Office and Mr. Eckert from the Office of Legislative Liaison. We are very pleased to appear before the committee and offer any help we can in the consideration of these 12 bills and the 13th one you have under consideration from the Senate, S. 2080.

These bills have for their purpose the exclusion of certain income from consideration in determining the eligibility of a pensioner, either the veteran or his survivors. Among the exclusions would be social security, State veterans' bonuses, life-insurance income, and the waiver of certain annuities like the civil-service or the firemen's or policemen's retirement systems.

The effect of such bills, if enacted would be to place more veterans and more survivors in the category of being eligible to receive pension payments.

We recognize, of course, that whatever is finally done with these bills is for determination by the committee and by the Congress, but we thought we should pass on our views at least for your consideration.

The general character of the VA pension system over the years has been an income-maintenance system, a device for providing certain income to a veteran who is considered to be disabled at a certain age and has little or no income.

For the record, the income level is $1,400 for the veteran or survivor with no dependents and $2,700 a year for the person with dependents.

The eligibility insofar as disability is concerned-again for the record-is that a person 10-percent disabled at age 65 is considered eligible within the income limits or 50-percent disabled at age 60 and within the income limits or 60-percent disabled at age 65.

It is well to recognize that about 1 year ago the VA had approximately 695,000 veterans of World War I and World War II on the rolls drawing about $500 million a year and approximately 360,000 survivors drawing $220 million a year.

Mr. DORN. Excuse me. How many in that category?

Mr. NELSON. We had 360,000 survivors drawing an annual benefit of $220 million.

During the past 20 years the Federal Government has inaugurated a number of other programs for income maintenance of our citizens, among those being old-age and survivors insurance, railroad retirement, civil-service system for Federal employees, and others. These programs during these years have been added beyond the pension program, which had been in effect for, I believe, roughly 140 years.

It is our position that there is a need for reviewing the VA pension program at this point in history in view of these recent developments in the past 20 years. We have expressed that view in other reports to the Congress and the Bradley commission in its report suggested the same review.

The 12 bills under consideration will definitely bring more men and survivors into the system. As an illustration, we could say that a veteran retired under the old-age and survivors insurance system and having a living wife drawing $1,800 a year and earning $1,100 on a part-time basis would be eligible for a VA pension under these bills. Thus, under the illustration given, he would have an income of $3,845 a year.

If he did not have a living wife, he would be drawing, say, $1,200 from social security and earning $1,100 on part-time work, and drawing $945 from the Veterans' Administration, or a total income, a single man with no dependents, of $3,245.

A veteran retired under the old-age and survivor system at, say, $840 a year and not working but having collected on an insurance policy, a commercial policy, worth $10,000, would have income that year, including the VA pension, of $11,785, because under the proposed legislation, he would be eligible for the VA pension. Those are a few illustrations.

In each instance where the proposed bills result in the veteran's income being considered less than under current regulations there will be an increase in VA disbursements of $945 a year for each veteran who becomes eligible. As we see it, these bills when enacted, we would feel the effect of these bills, if enacted, for the next 60 years or more as men by degrees reach the age where they are eligible for the pension program.

Mr. DORN. The pension program is now costing upward of $800 million for World War I; is that right?

Mr. NELSON. About that now, as of this time. A year ago it was a little less, but I expect it has reached that point now.

Mr. DORN. Do you gentlemen have any approximate estimate that might come anywhere near what additional cost these bills might add to that $800 million?

Mr. NELSON. No.

Mr. DORN. Could it go as high as $900 million?

Mr. NELSON. We could not venture an estimate on that because it is rather difficult to discern, let us say, and certainly the VA would be in a better position to make an estimate, but even in their case, I think the facts might not be available.

For example, how many of these folks will become eligible when you can exclude social-security payments as income, how many of them are collecting on insurance policies, and so on? I think the idea here is when you permit these exclusions from income and there are already some in existence under current law-there will be others coming along and that by degrees we work around to a point where most things are excluded and the veteran reaching 65 becomes automatically eligible. We are sort of moving in that direction through these bills.

Mr. DORN. This could be the beginning of the undermining of our pension programs which we have known?

Mr. NELSON. That is right.

Mr. DORN. Which you think has worked pretty nicely.

Mr. NELSON. I think the pension program as it stands, coupled with the other programs, constitutes a fair combination. We feel that the programs discussed in these bills have the effect of creating duplicative results in that a man eligible under the other programs would become eligible under this program without restriction as to these elements of income.

Mr. DORN. In other words, this might possibly be a way to arrive at a general pension similar to the one passed the House last year by such an overwhelming majority.

Mr. NELSON. It is a step in that direction, yes.

Mr. DORN. Go right ahead.

Mr. NELSON. That sums up our general discussion on the bills. We feel that it would be desirable not to act favorably on them in view of the total package of programs that is available and the improvement that has occurred in those programs in recent years.

As Mr. Hughes, representing the Budget Bureau, mentioned the pension program is an income maintenance program. It is a device to provide cash in the hands of the recipient for his expenses of living. We feel that the receipt of a life insurance policy proceeds or other sources of income or other sources of cash received should be considered in determining the man's eligibility.

For example, today the Veterans' Administration laws do not consider the question of what his assets are. A man may have substantial assets that are not producing for him much income, but he does have the assets. Also, the current law does not recognize the income or the assets of the man's spouse. She may have a substantial income in her own right and still the man is eligible for a VA pension. These bills would further liberalize the present law in that respect. Mr. DORN. Are there any questions?

Mr. TEAGUE of California. I would like to say this for the record: That I came in here not knowing anything about this subject, and maybe I do not yet, but I find myself in pretty general agreement with what Mr. Hughes and Mr. Nelson have said. I am going to be one committee member who is going to be hard to convince that we ought to pass this type of legislation.

Mr. DORN. Mr. Christopher.