Evening star., 1939-03-24
Cutin Scheduled PoyRo|| Taxes
For Next Three Years Proposed
By Morgenthou as Business Aid
Plans Are Based on
Limited Reserve
To Pay Claims
BACKGROUND


House Ways and Means Com
ntttee began hearings February
on proposed changes in Social
Security Act after President
Roosepelt submitted recomn,en-
ddtions of Social Security Board
for extension of act and increas-
ing old-age insurance benefits in
early years. Chairman Altn,eyer
said then proposed changes
1Dould so increase costs as to do
dWay tDith contemplated reserue
IN IS years, after 1Dhich some OF
cost should be borne from general
tares, but said revenue from pay
roll tares should not be reduced.
3y the Associated Press.
Secretary of the Treasury Nor
genthau, speaking in behalf OF
''business recovery" proposed today
to lift from American productive
enterprise" the burdens of tax in
creases in the old-age insurance
system.
"At the present stage of business
recovery" the Secretary told the
House Ways and Means Committee
''it might be well to change the pay
roll tax schedule to keep the levies
lower than had been scheduled for
the next three years.
I'm periods of incomplete business
recovery like the present" he said
in testimony giving Treasury ap-
proval to proposals advanced par
ticularly by business men, 'the con-
tributory old-age insurance system
should be so financed as to have the
least possible deterring effect on
business"
Three Alternative Proposals.
Specifically. Secretary Morgen-
thau presented three alternative
proposals to cut down the tax rate
now planned for employers and
employees alike in the near future.
At the White House. President
Roosevelt backed up the Morgen-
thau suggestions and said the ad-
ministration was working on a
change in the social security re-
serve provision, with the view of
restricting this fund to protective
amount sufficient only to take care
of old-age payments over a period
of from three to five years.
He said the average thought on
the question was that reserve of
between 81, 500 900 900 and So, 600, ,0OO,-
600 would be adequate
Mr.. Roosevelt told his press con-
ference the existing reserve pro-
vision had been properly criticized
because it involved the possibility
of an unlimited reserve.
He added, however, that it was not
true the Government was going to
build up a $40, 900 900 900 reserve.
The Ways and Means Committee
has been holding hearings on pro-
posed revision of the social security
system, as well as taking testimony
on such proposed substitutes as the
Townsend and the general welfare
plans.
Any change in old-age pension
tax rates, such as were suggested
by Mr.. Morgenthau, would have to
be enacted by Congress-. The
committee recently voted against
extending the program to include
certain types of workers, such as
farm hands, who are now excluded.
A reduction of social security taxes
has been advocated in business
quarters as an aid to recovery.
Secretary Morgenthau's proposals
had the support, a board spokesman
said, of Chairman Arthur j. Alte-
meyer and other members of the
Social Security Board.
Based on Experience.
In his statement read to the House
committee, the Treasury head said
experience with social security had
warranted partial abandonment OF
the reserve system and that, there
fore, tax rates for the next few
years could be less than anticipated
when the act was passed in 1885.
The present law levies / per cent
of pay rolls each on employees and
employers from 1887 to 1899, IL per
cent each, 1910 to 1912; per cent
each, 1943 to 1915; 211a per cent each
1916 to 1948, and per cent each in
1949 and after.
The alternative plans included:
!. One and one-fourth per cent
each in 1910, IL per cent each in
1941 and Ia per cent in 1912.
2. One and one-sixth per cent in
1910, Ia per cent in 1941, ~ per
cent in 1912.
3. Continue present / per cent
rate through 1912.
The alternative plans all pro-
vided for adopting the present pro-
posal of 3 per cent each in 1943 OF
later, but Secretary Morgenthal
said this rate was retained only for
convenience because future condi-
tions might warrant either a lower
or higher rate eventually and Con-
gress would have ample time before
1943 to restudy the problem.
Wants Early Reserve.
The Secretary pointed out thai
present rates were based on a de.
sire to collect enough taxes to pay
old-age benefits in the early year.
of the plan and also to accumulate
q reserve fund.
He explained that the purpose o1
the reserve was to make the plar
self-supporting so persons not in.
sured by it would not have to pay
part Of the cost.
Experience has shown, Mr.. Nor.
kenthau added, that the benefits o1
the act will be so widely diffusec
that supplemental funds from gen.
eral tax revenues may be substi.
tuted for a considerable proportion
OF the expected interest earning,
from the large reserve contemplated
by the present law"