Evening star., 1942-10-04
Cut the Tox-Now

pensation tax again is before a sub
committee of the House District
Committee for revision. There is no
argument over the fact that the tax
now being levied on District en-
p!oyers is too high, both in relation
to the excessively large reserve fund
(abcut s30,0oo,000) and in relation
to the benefit payments to unem-
plcyed. Practically every one con-
cerned is convinced that the tax
should be reduced and if the District
Committee and, later on, if Congress
will consider this matter as local
legislature, functioning for the Dis
trict of Columbia, little time will be
lost in reducing the tax.
Two methods of tax reduction
have been proposed. One, favored
by the District Unemployment Com
pensation Board and by some en-
ployers in the District and some
elements Of organized labor, would be
to make fiat tax reduction apply
ing equally to all taxpayers The
other, favored by what is probably a
majority of local employers, and by
all but few of the States and writ
ten into the National Social Security
Act itself, is to make tax reduction on
the basis of what experience in bene-
fit payments thus far has revealed.
This principle would be to fix the tax
in relation to the employers tax
payments and the payments of
benefits to his former employees. Or,
in other words, to make the tax COM
mensurate with the risks (in unem-
ployment) encountered in each
industry, certainly a sound and
equitable principle.
The Star is printing a series of
articles, beginning today, which will
attempt to summarize the arguments
in favor of each of these principles.
Such a summary requires more
space than is available here. But in
connection with these arguments,
one thing must be borne in mind:
The employers, or taxpayers, in the
States as whole are against the
principle of a flat-rate tax. Many
people profess to see in a fiat tax,
applying equally to everybody,
move in the direction of "federaliza-
ton" of the whole unemployment
compensation tax system. In that
case the States would lose their
existing power of fixing their own
taxes and benefits with Social Sc
curity Board approvaD and have
their taxes and benefits Standard
lied on national basis, each State
paying the same tax, the same bene-
fits and all the tax revenue con-
trolled by the National Government.
Whether or not it is true that an
act Of Congress to reduce District
taxes on the flat-rate principle, all
taxpayers paying the same regard
less OF employment records, would be
an actual step toward such federali-
zation may be a matter of opinion.
But if most of the members of Con-
gress feel that it would be, and
knowing the sentiments of their con-
stituents would oppose it, then an
effort to reduce taxes in the District
by that method would fail again.
And the District would continue to
pay tax that is admittedly exces-
sive, which is wholly unrelated to
any ability to pay and wholly unre-
lated to actual demands.
There is inescapable logic and
equity behind the experience rating
principle. 1t couples taxes with the
benefits derived from taxes. It con-
ceives of unemployment as an in
dustrial hazard, compensation for
which is part of the cost of produc-
ton, which varies with different
industries.
But the Districts plea to Congress
is to consider the need for tax reduc-
ton on its own merits. Regardless
of the method of reducing the tax,
make the reduction that conditions
in the District so plainly demand. If
there are differences of opinion they
should be weighed. But no differ
ence of opinion should prevent re-
duction of the tax by whatever
method is considered fairest and
most workable, taking into consid-
Grafton the benefits to the unem-
ployed and the taxes paid by the
employer.