Evening star., 1939-08-13
A Remedy Is Necessary

In signing the social security law
amendments Friday the President
was on strong ground in pointing out
the dangers inherent in such pro-
posals as the defeated Connally
amendment, under which the Fed
eral Government would have made
two-to-one contribution to the
States up to the first fifteen dollars
for their oldage assistance. Once the
f1fty-f1fty principle is broken down
by such a departure, the President
pointed out, the whole tendency will
be to increase the Federal contribu-
ton with proportionate decrease, or
perhaps the elimination, of the State
contribution. Particularly dangerous
in the case of the social security pro-
gram, the precedent, once establish
ed, would eventually be extended to
other forms of Federal grants-in-a
and place a wholly unbearable bur
den on the National government.
The Presidents statements, while
correctly addressed in the main to
the increasing benefits made possible
under the social security amend
ments, might appropriately have in
cluded reference to the problem now
represented in the unemployment
compensation payroll taxes, under
which most of the States, and par
ticularly the District of Columbia,
are piling up unemployment reserves
far in excess of benefit payments
The Mccormack amendment, which
lost out in conference, would have
permitted the States, upon the accu-
mutation of certain minimum re-
serves in relation to benefit demands,
to reduce the payroll taxes. In place
of the Mccormack amendment, how
ever, the conferees compromised on
provision under which Federal pay
roll taxes, as in the case of payroll
taxes for old-age benefits, will not
apply to incomes in excess of 50 ,OO0
While this compromise automati-
cally extends some tax relief to en-
ployers-the savings being estimated
at S65,0O0, ,0O0-full benefit cannot be
achieved until the local laws, under
which the States and the District
of Columbia collect unemployment
benefit payroll taxes, are likewise
amended. In the District for in
stance, the employer after January
l, 1910, will be relieved of Federal
payroll unemployment taxes on SAL
aries in excess of $4,000. But he will
continue to pay the local tax on his
total payroll. The credit against his
Federal tax, in other words, will ex-
tend only to that portion of the tax
paid on salaries of $4,000 and under.
Local unemployment compensation
payroll taxes, which on August l had
reached total reserve of 3,737 900,
represent ratio to benefit payments
Of about three -and-a-half to one.
This year THE ratio is not expected to
decrease, for, despite some increase
in benefit payments, larger tax COL
lections are anticipated. This repre-
sents excessive taxation for which a
reasonable remedy must be found.
The remedy would seem to be either
the practical application of merit
system" under which taxes would be
reduced in some relation to the in
dividual employers record in main
tanning steady employment, or a flat
reduction of the tax based on the
ratio of necessary reserves to benefit
payments Certainly the condition
which finds tax three -a-half
times in excess of legitimate de
mands on the proceeds is wholly un-
sound economically and evil in prin-
ciple.