Evening star., 1942-12-09
Opposes Decrease
In Unemployment Tax
Writer Argues for IT Rote
Until Postwar Period
Of Transition Closes
To the Editor Of The Star:

To the Editor OF The Star:
Every SO often the figurative equiva-
lent of Boston night club fire occurs
and Immediately loud walls are heard
why didn't somebody warn us or do
something about it?" Upon investiga-
ton one usually finds the warning was
given but ignored.
1t has been repeatedly pointed out
that this war may be followed by de-
preston; that such succession of events
has been true Of our past history: that
postwar period may find us so burdened
with debts as to make one hesitate to
launch vast public works program to
aid the postwar transition period: that
new political leaders may not be recep-
tive to continued public spending.
1t has also been repeatedly pointed out
that cuts in unemployment compensa-
ton tax rates, aside from having un-
desirably inflationary effects, would
probably subject the unemployed in post
war period to the hateful means" test,
and so unemployment would once more
be handled as a charity problem rather
than an insurable risk
Despite these warnings, the States are
cutting their unemployment compensa-
ton taxes recklessly. Unbelievable?
Illogical? 1t must then be remembered
that 1t is equally fantastic and illogical
that up to the time the Federal Social
Security Act was passed in 1885 only one
State, Wisconsin, had an unemployment
c q fiOy7 thot he
eral Social Security Act in effect laid a
Federal penalty" tax of 81 per cent on
any State not adopting an unemploy-
ment compensation statute, most States
today might still be without any such
system. Estates with a 81 per cent tax
could keep the 27 per cent yield, in
stead Of giving it to the Federal Gov
ernment)
Let us recall that 1t took about one
third of a century for nearly all of the
States to pass workman compensation
laws mississippi is still without one),
whereas so American Jurisdictions mot
counting Wisconsin. At States, Alaska,
Hawaii and the District of Columbia)
passed their unemployment compensa-
tion laws quickly when the 27 per cent
Federal penalty stared them in the face.
At the outset of the unemployment
insurance program, the States had 27
per cent payroll tax for the purpose of
financing unemployment insurance and
building a reserve. The understanding
was widespread that this 81 per cent tax
rate biased on the advice of presidential
committee) would be kept constant for
each State As whole, at least for
major business cycle. so that body of
actuarial data could be built. Then and
only then, was the tax to be changed,
since there would be at that time. a
basis for judging whether the 27 per
cent tax was too high or too low.
Unfortunately. under one section Of
the Federal Social Security Act, States
were permitted to lower this 81 per cent
(or standard rate) for any employer, on
the basis OF his stability: yet such an
employer would be regarded by the Fed
eral Government as having paid the full
81 per cent tax. Each State could Judge
by what measure it would lower such tax,
with practically no Federal restriction.
The result Is that today, under exactly
the same conditions, an employer might
pay Is per cent in California, O45 per
cent in Hawaii, 2 per cent in Oregon
and 0.5 per cent in Nebraska.
Since unemployment insurance bene-
fits began in January, 1888. the indi-
vidual States experience has varied
greatly. For example, while in 1910
few States paid less than 30 cents in un-
employment insurance benefits for every
dollar collected in 1910 in unemployment
insurance contributions, 81 States paid
out 70 cents or more on each such dollar
collected and four States actually paid
out more than they collected. Why this
high ratio for some States? Nineteen
hundred and forty can hardly be con-
sidered depression year. Restrictions,
in general. on benefit payments during
this period tas they still are today
were so numerous with respect to eligi-
bility, waiting period. qualifications,
duration and weekly benefit amount. as
to draw condemnation by an interstate
committee made up of State officials
themselves. A reason for high ratios
seems to be that We always have had
large groups of unemployed with us.
One has the impression that industry
payroll climbed during the years 1888
through 1910. And it did. Yet look at
the record for the United States: