Evening star., 1936-10-03

Attired in 1Uhite, Premier
salute 1Uhen ne reUietDed gre
ing State money, which is used in the
old-age pension program. say the of
set" plan Is clumsy, sets up 49 taxing
systems instead of one, and is Of queS-
tionable validity.
Offset System Contention.
Advocates of the offset system con-
tend that the reason many States have
not enacted unemployment compenSa-
ton laws years ago is that by doing so
they would have placed their manu-
facturers under competitive dlsad-
vantage. One fat tax, which every
employer has to pay whether his State
has a program or not, they contend,
not only removes the deterrent, but
serves as a spur to enact adequate pro-
grams Immediately.
But here enters the issue OF "coer-
cion." Congress has the right to levy
a pav roll tax, but has it the right, by
doing so, virtually to compel the
States to enact unemployment COM
pensation laws-and laws acceptable
to the Social Security Board?
Another issue here is whether one
employer can be taxed to compen-
safe for the jobless periods OF an
other company's employees. In its
railroad pension act decision, the
Supreme Court said it can not. This
issue. however, will arise in connec-
ton with the validity of State unem-
ployment acts. not the Federal act.
In Wisconsin the company reserve
plan does not contemplate shifting
one employers contribution to an
others employees. In New York the
pooled" fund does.
8. Old-age annuities. Here the is
sue is whether the court accepts the
literal wording and technical set-up
of the act, or looks behind these to
its intent. If it does the latter. the
issue is whether the Constitution is to
be construed broadly, as the minority
Of the court, speaking generally, has
urged it be construed. or strictly. as
the majority usually has interpreted
it.
Throughout this series, and in the
mind of officials and the public gen.
orally, the taxes levied against pay
rolls and the contribution required
from employees to finance this old
age benefits section have been con-
sidered in the nature of insurance
premiums" on annuity policies, which
could be collected on retirement at
the age of IS.
But that is not the way the act
reads. AS J. S. Freund, executive
officer of the New York regional office
explains: While the general con-
ception is that the pay roll tax and
benefit payments are tied together,
actually there Is no connection be-
tween them.
No Specific Purpose Tax.
"The Government cannot tax for
any specific purpose or earmark taxes
for any purpose and has not in this
case. The money goes into the general
fund the same as all other taxes that
are collected"
In other words, the pay roll tax
money piles up in the Treasury jack
pot and Congress, in an entirely
separate action, makes appropriations
from that jackpot for the purpose of
paying the annuities.
Such a fictional separation OF
functions was thrown out by the Su-
preme Court when it invalidated the
taxes of A. A. A. Eliot
contends that that was different in
that the A. A. A. sought by collection
Of the tax and withholding of bene-
Ats to regulate what the farmer did
with his own property.
The administration contention. will
be that technically and legally the
AK and annuities are separate. The
money is not earmarked. The act
was written specifically so it would
1ot be earmarked. Therefore, how
,an the act be invalidated on the
grounds that it is earmarked?
If the court looks beyond that into
he intent of the act, it will be faced
With the question of whether the
of q vast publicly OPP
,rated insurance company is a con-
titutional function of Government.
And what the answer to that win
,e is anyone's guess. On their de-
:isions to date four of the judges
Ind possibly five or more might be
to vote that the whole idea
vas beyond the intent of the found
ng fathers who penned the Consti-
;ution. At least three of the justices
nave taken a more sympathetic view
,f the social and economic concepts
If the New Deal.
Then there always is the possibility
II change in the court. In view of
he advanced age of most of the
several changes may be ex-
,ected in the next four years. The
attitude of the new justices on social
security and similar laws may be
quite different If they are appointed
~ Gov. ALI M. Landon than if they
ire named by President Roosevelt.