Evening star., 1942-12-09
Condition Versus Theory

Star prints letter opposing the pro-
posed reduction Of the Districts un-
employment compensation tax rate.
The letter raises some points that
merit examination.
Here in the District, we are COL
lecting unemployment taxes for a
reserve fund already so large that
only two OF the seven millions paid
into it annually 60 out in benefits.
Thus the large surplus. For the past
five years, the ratio of funds paid in
to the funds paid out has been about
four to one. If all tax payments
stopped Immediately, the present
rate OF payment could be continued
for eighteen years without another
cent added to the reserve. The ratio
OF the reserve to the highest years
benefit payments is about fifteen to
one, compared with a national ratio
Of perhaps four and a half to one.
Judged by any standard or by COM
mon sense alone the Districts re-
serve fund bears no reasonable pro-
portion to present or even future de-
mands and the excessive tax being
collected to increase it should be
reduced
The Star does not believe there is
any great opposition to the principle
Of unemployment insurance. Our
people believe in it. There was no
great opposition at the time it was
adopted. In pointing to the reduc-
tions in the State tax rates, and
the State reserve funds, the writer
fails to mention that the reduc-
ton in each case has been ap-
proved by the Social Security Board.
The only method by which the tax
can be reduced by State law Is
through adoption of an experience
rating approved by the board. This
means that the principle of insur-
ance is in reality being applied to
unemployment, for the experience
rating means that the lower the risk
OF unemployment, as shown by ex-
perience, the lower the tax; the
higher the risk. the higher the tax.
This principle tends to reduce the
hazards of unemployment, just as
successful experience in accident
prevention has reduced the rates
under compulsory workmen's COM
pensation. The hope of reducing a
tax is powerful incentive.
The Stars correspondent implies
that should another emergency in
unemployment arise, the reserve
funds will be too low to support the
demand for benefits. But the expert
ence rating also means that when
benefit payments increase beyond
safe relation to the reserve, the tax
rate automatically goes up and the
reserve fund Is replenished. The re-
serve fund must remain adequate.
The letter suggests that the unem-
ployment problem be considered ma
tionally, instead Of locally; that all
tax rates be equalized at 27 per cent
and that all State funds be controlled
from one national pool. That is
known as liberalization" We may
come to it as Nation eventually, but
not now-because Congress, repre-
senting the States, is definitely
against it. Must the District con-
tinue to pay an excessive tax until
the States are persuaded to pool their
reserves? Because Congress is against
federaliza ton it is impossible to
amend the District and the national
laws to permit fiat, horizontal re-
duction in the District tax rate. For
the fiat reduction suggests the prin-
ciple of equalizing all taxes. On the
other hand, while most of the States
have reduced their tax rates by
adopting the experience rating, it is
difficult to amend the District law
now, because, on a request for unani-
nous consent, single voice in Con-
gress favoring the liberalization OF
all taxes is enough to prevent amend
ment.
Thus the unrepresented District
taxpayers are caught between two
theories. and will be taxed excessive
ly until there is time to debate them
adequately and reach fair decision.
But the decision should be based on
conditions in the District, not on