Evening star., 1942-07-26
Aqree on 1t Now

Inc DlStI1ct Unemployment COM
pensation reserve fund is assuming
such astronomical proportions that
amendment to permit substantial
reduction in the now excessive pay
roll tax is generally recognized as a
real necessity. The fund is getting
out Of hand. Today 1t stands at
$28,149,3S4. In the next thirty days
it is expected to reach 9,399, ,284.
Interest charges paid by the Treas
ury on this fund were $4,000 six
years ago. This year they may reach
100000.
There is almost universal agree
ment on the need to reduce the tax
in order to prevent continued piling
up OF a reserve fund already swollen
out OF all proportion to the with
drawals for benefit payments. The
question now is how to do It, The
pending McGehee bill provides fiat
reduction of the payroll tax rate to
one-half of l per cent, applying
equally to all taxpayers and liberal
izing the benefit payments. Until re-
Gently it seemed that this was the
bill most likely to win support.
But Chairman Randolph OF the
House District Committee believes
that sentiment in his committee as
well as in the House favors tax re-
duction by the so-called experience
rating" formula, under which tax
payers showing the best employment
records would be rewarded with
maximum tax reduction; those show
ing the greatest fluctuations in en-
ployment would pay taxes up to the
present maximum of 27 per cent.
Mr.. Randolph has been studying the
subject and has tentatively fixed
hearings for early in September.
Under the National Social Security
Act, the only method by which the
States can obtain reduction in the
tax rate is to adopt, after Social
Security Board approval, an expert
ence-rating formula. Thirty -eight of
the States have these formulas in
effect. Five of the States have re-
pealed their experience rating clauses,
but In none of these had the expert
ence-rating system actually been in
effect. w..
From the beginning, District tax
payers have favored the experience
rating principle. It was recognized
in the District law-by clause
which accepts the experience rat
ing, but presents no workable
formula for its application. The
experience-rating principle is, in the
first place, equitable and logical in
that 1t places the highest tax on
those who contribute most to un-
employment and rewards those, by
tax reduction, who maintain steady
payrolls. It provides an incentive to
eliminate, insofar as possible, the
seasonal and other '1ayoffs" which
add to unemployment. Mr.. McGehee
has indicated to Mr.. Randolph his
willingness to amend his bill to make
the experimenting formula effec-
tive January 1, 1943. The liberalized
benefits would be retained.
Some of the members of the Dis
trict Unemployment Compensation
Board have been opposed to the
experimenting principle, favoring
the McGehee bill as now written.
Some OF the elements of organized
labor have not favored the expert
ence-rating principle. But most Of
the States and their taxpayer groups
do favor the principle and they are
apt to oppose and, through their rep
resentatives in Congress, even to pre-
vent amendment OF the District act
unless the experimenting principle
is applied. That happened once be-
fore. 1t can happen again. Some of
the taxpayer groups believe that
hat-rate tax reduction-necessita
amendment OF the national law
would invite other amendments to
which they are opposed.
In the opinion of some observers,
the case here narrows down to
whether District taxpayers will
accept an experience rating clause
or obtain no tax reduction at all.
The States are represented in Con-
gress. The District is not. And if
congressional sentiment favors the
experience rating principle, which
Mr.. Randolph believes is true, that
is the principle on which local tax
payers and their representatives on
the District Unemployment Com
pensation Board should present a
solid front. Under no conditions
should difference of opinion on the
method of tax reduction be permitted
to place in jeopardy the important
objective-which is the reduction of
an excessive, wasteful and burden
some tax.