Mr. EKERN. That is the committee of the United States Chamber of Commerce, upon which these men served, and their report in March 1935.

Now, if the committee please, I just want to emphasize that. As I stated before, I have lived with this question for twenty-odd years, and there is no man to whom I yield in the advocacy of sound reserves for all life insurance and all private annuity pension plans. Even if an employer puts in his own system, he must figure that his organization, and this plan which he adopts, after all, may be somewhat temporary. On the other hand, if you establish a pension plan by the Government, it can be made to include all the people of the United States, or a definite, large group of all the people of the United States, and be made very permanent. In my opinion it is absolutely impractical and, for the reasons set out in the reports mentioned, impossible and against the public interest to attempt to set up reserves. It is also wholly unnecessary.

With regard to the effect on the situation here of the statement of the facts or as to policy-what was involved in the decision in Massachusetts under the processing tax, and what was involved in the N. R. A. decision, was primarily a statement of policy. I am not asking for a statement of policy. That was not what was involved in the Chicago Board of Trade v. Olson. In that specific case they stated bald facts, and it was those facts which Chief Justice Taft recognized in saying that the law had to be held by the Court valid because Congress had declared the facts.

We are not asking this committee or Congress to state anything as a fact except what is a fact. We are not asking them to establish merely a declaration of policy as a basis for this legislation.

It is a new proposition how far the Supreme Court will go in holding valid appropriations? There is no question that that will be opposed very strenuously, and that this will come before the next term of the Supreme Court.

I see nothing inconsistent here and nothing that would injure the standing of this legislation, to recognize that this classification here, which, after all, applies to carriers in interstate commerce, is a fact, and so recited, because it refers to those who are subject to the jurisdiction of the Interstate Commerce Act and employees of these carriers so defined, with the exception of those two classes heretofore mentioned. I do not see how it would weaken our position if I have any connection with any such case, I shall insist that that side of it be brought before the Supreme Court of the United States, that it is limited to that classification.

Now, if it is limited to that classification, then the power of Congress to appropriate money for the purpose of these pensions cannot be much different from the power which the Congress exercised through the R. F. C. to advance money to these railroads with which to finance themselves. One is just as sound as the other. I believe both are sound. I do not believe there is any question about it. It is entirely proper for Congress to do that. Then, if the Court sees fit to sustain the Social Securities Act, if the Court sees fit to sustain this on the question that this is purely an appropriation and does not have anything to do with the levying of a tax, then there is no harm done either way.

If there is some question about it, the question of sustaining it on the classification is something which Congress clearly has the power to deal with, interstate commerce, with the facts again before it, the Court may well recognize a connection between a pension payment and the retirement of the aged man from the service, with something for him to live on in his old age, not for the benefit of the old man, but for the benefit of the employer. You cannot justify any pension system on any other ground. It is the same with a private penson system or a public pension system. The real basis for all this pension movement all over these United States and throughout the world is the fact that it benefits the employer and the public at large equally with the employee. If you keep it on that basis and insist on those facts, I have no fear that this legislation will not be ultimately upheld by the Supreme Court of the United States.

I want to thank you for your patience.

Mr. CROSSER. In regard to the filing of a statement by Dr. Parmelee, we would like to have it in by 10 o'clock Friday morning, if possible, because we must send these hearings to the Printer in order to have them back by Monday, inasmuch as we wish to have prompt action. The clerk tells me that he must have the statement here not later than 2:30 Friday afternoon.

Mr. WHITING. You do not intend to give us a chance to present it orally?

Mr. CROSSER. I do not think it is necessary to go into it orally. It is a matter of figures, which we can study better in writing than if it is given orally.

Mr. WHITING. We have the privilege of presenting it in the Senate on Monday, and I doubt if we can get it here Friday morning. We have sent for our actuary, who came down here today by airplane.

Mr. CROSSER. Can you have your statement in by, say, 11 o'clock on Monday?

Mr. PARMELEE. I can get it here by Monday morning; yes, sir.

Mr. CROSSER. If you can, then we will have the printed hearings back by Tuesday, which will delay us only 1 day. I think the committee will consent to that. I want to get the hearings printed as soon as possible, for the full committee.

Mr. MARTIN. It will be statistical, largely?

Mr. WHITING. Yes, sir.

Mr. MARTIN. I do not think you will lose anything by not presenting it orally. We are going to study it.

Mr. CROSSER. It is rather hard to follow an oral statistical statement.

Mr. WHITING. We will be very glad to file it Monday morning.

Mr. EKERN. Mr. Chairman, before adjourning, I notice in the pasted bill, which I gave you, on some of the copies there was not stricken out on the last page of the typewritten material the words. "to regulate commerce among the States." I agreed with Judge Krauthoff to strike that language out. It is stricken out of some of the copies but apparently was overlooked on some of the others. May I have the minutes show that correction?

Mr. CROSSER. That is all right; yes, sir.

The hearing will be adjourned.

(Thereupon, at 5 p. m., the hearing was closed.)

(The following matter was submitted for the record:)

MEMORANDUM OF AUTHORITIES SUBMITTED BY R. V. FLETCHER, VICE PRESIDENT AND GENERAL COUNSEL ASSOCIATION OF AMERICAN RAILROADS

It is our contention, for the reasons stated orally, that these two bills must be considered together. If they are considered separately, and giving attention to the taxing bill, it would be manifestly unconstitutional, since there would be no rational basis for imposing taxes upon railroads and railroad men for general revenue purposes and excluding all other businesses and occupations. See in this connection the case of Gulf, Colorado & Santa Fe Ry. Co. v. Ellis (165 U. S. 150).

This involved the constitutionality of a State statute under the fourteenth amendment. The statute provided for the assessment of attorneys' fees as damages against railroads failing to pay stock claims. The court in holding this unconstitutional as representing an arbitrary classification used this language: "But it is said that it is not within the scope of the fourteenth amendment to withhold from States the power of classification, and that if the law deals alike with all of a certain class it is not obnoxious to the charge of a denial of equal protection. While, as a general proposition, this is undeniably true, Hayes v. Missouri (120 U. S. 68); Railroad Company v. Mackey (127 U. S. 205); Walston v. Nevin (128 U. S. 578); Bell's Gap Railroad v. Pennsylvania (134 U. S. 232); Pacific Express Co. v. Seibert (142 U. S. 339); Giozza v. Tiernan (148 U. S. 657); Columbia Southern Railway v. Wright (151 U. S. 470); Merchant v. Pennsylvania Railroad (153 U. S. 380); St. Louis & San Francisco Railway v. Mathews (165 U. S. 1); yet it is equally true that such classification cannot be made arbitrarily. The State may not say that all white men shall be subjected to the payment of the attorney's fees of parties successfully suing them and all black men not. It may not say that all men beyond a certain age shall be alone thus subjected, or all men possessed of a certain wealth. These are distinctions which do not furnish any proper basis for the attempted classification. That must always rest upon some difference which bears a reasonable and just relation to the act in respect to which the classification is proposed, and can never be made arbitrarily and without any such basis."

It is true that this arose under the fourteenth amendment, but the principle applies as well to the fifth amendment.

Considering the bills together, we contend that they are unconstitutional under the authority of the Child Labor Tax case (259 U. S. 20), considered in connection with Hammer v. Dagenhart (247 U. S. 251).

It will be remembered that the Court held in the earlier of these two cases that Congress could not prohibit child labor in the guise of regulating interstate commerce. Thereafter, Congress undertook to prohibit the practice by using the taxing power, but the Court in the Child Labor Tax case said, among other things:

"In the case at the bar, Congress in the name of a tax which on the face of the act is a penalty seeks to do the same thing, and the effort must be equally futile.

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The analogy of the Dagenhart case is clear. The congressional power over interstate commerce is, within its proper scope, just as complete and unlimited as the congressional power to tax, and the legislative motive in its exercise is just as free from judicial suspicion and inquiry. Yet when Congress threatened to stop interstate commerce in ordinary and necessary commodities, unobjectionable as subjects of transportation, and to deny the same to the people of a State in order to coerce them into compliance with Congress' regulation of State concerns, the court said this was not in fact regulation of interstate commerce, but rather that of State concerns and was invalid. So here the so-called 'tax" is a penalty to coerce people of a State to act as Congress wishes them to act in respect of a matter completely the business of the State government under the Federal Constitution."

We also call attention to the case of Linder v. United States (268 U. S. 5), where the court said:

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Congress cannot, under the pretext of executing delegated power, pass laws for the accomplishment of objects not entrusted to the Federal Government.

And we accept as established doctrine that any provision of an act of Congress ostensibly enacted under power granted by the Constitution, not naturally and reasonably adapted to the effective exercise of such power, but solely to the achievement of something plainly within power reserved to the States, is invalid and cannot be enforced." See also Trusler v. Crooks (269 U. S. 475), a case imposing a heavy tax upon grain purchased on the option plan. The Court held that the real purpose was not to raise revenue but to bring about regulation under the guise of the taxing power. It was there said:

"The stipulated facts reveal the cost, terms, and use of 'indemnity' contracts, together with their relation to boards of trade, and indicate quite plainly that section 3 was not intended to produce revenue but to prohibit all such contracts as part of the prescribed regulatory plan. The major part of this plan was condemned in Hill v. Wallace, and section 3, being a mere feature without separate purpose, must share the invalidity of the whole (Wolff Packing Co. v. Industrial Court (267 U. S. 552, 569)).

"This conclusion seems inevitable when consideration is given to the title of the act, the price usually paid for such options, the size of the prescribed tax (20 cents per bushel), the practical inhibition of all transactions within the terms of section 3, the consequent impossibility of raising any revenue thereby, and the intimiate relation of that section to the unlawful scheme for regulation under guise of taxation. The imposition is a penalty and in no proper sense a tax (Child Labor Tax case (259 U. S. 20); Lipke v. Lederer (259 U. S. 557, 561); Linder v. United States (268 U. S. 5)."

In J. H. McLeaish & Co. v. Binford (52 Fed. (2d) 151) the Court, in dealing with a Texas statute relating to the transporation of cotton on the highway, had cause to use the following language:

"Disregarding pretense, subterfuge, and chicane, courts must, looking through form to substance, ascertain the true purpose of a statute, neither from its recitals of purpose nor from the evidence as to what the real purpose of its authors and backers was, but from the operation and effect of the statute as applied and enforced."

In connection with the validity of the taxing act, if that is to be separately considered, we call attention to Schlesinger v. Wisconsin (270 U. S. 230), which deals with an inheritance tax of the State of Wisconsin applicable to gifts made within 6 years of death, without regard to facts. The Court in this case used the following language:

"The challenged enactment plainly undertakes to raise a conclusive presumption that all material gifts within 6 years of death were made in anticipation of it and to lay a graduated inheritance tax upon them without regard to the actual intent. * * Gifts inter vivos within 6 years of death, but in

*

fact made without contemplation thereof, are first conclusively presumed to have been so made without regard to actualities, while like gifts at other times are not thus treated. There is no adequate basis for this distinction. * * A classification for purposes of taxation must rest on some reasonable distinction."

We also call attention to the case of Nichols v. Coolidge (274 U. S. 531), in which the Court uses the following language:

"This Court has recognized that a statute purporting to tax may be so arbitrary and capricious as to amount to confiscation and offend the fifth amendment (Brushaber v. Union P. R. Co., 240 U. S. 1; Barclay & Co. v. Edwards, 267 U. S. 442, 450. See also Knowlton v. Moore, 178 U. S. 41). And we must conclude that section 402 (c) of the statute here under consideration, insofar as it requires that there shall be included in the gross estate the value of property transferred by a decedent prior to its passage merely because the conveyance was intended to take effect in possession or enjoyment at or after his death, is arbitrary, capricious, and amounts to confiscation." See also Tyler v. United States (281 U. S. 497, 504), where it is said: "The possibility that a Federal statute passed under the taxing power may be so arbitrary and capricious as to cause it to fall within the due process of law clause of the fifth amendment must be conceded (Brushaber v. Union P. R. Co., 241 U. S. 1; Nichols v. Coolidge, 74 U. S. 531, 542), but the present statute is not of that character."

In Hoeper v. Tax Commission (284 U. S. 206), where the effort was to tax the income of a married man, basing the tax upon the combined total of this own and his wife's income, the wife's income being derived from her separate property, the Court said:

'Since, then, in law and in fact, the wife's income is in the fullest degree her separate property and in no sense that of her husband, the question presented is whether the State has power by an income-tax law to measure his tax, not by his own income but in part by that of another. To the problem thus stated, what was said in Knowlton v. Moore (178 U. S. 41) is apposite: 'It may be doubted by some, aside from express constitutional restrictions, whether the taxation by Congress of the property of one person, accompanied with an arbitrary provision that the rate of tax shall be fixed with reference to the sum of the property of another, thus bringing about the profound inequality which we have noticed, would not transcend the limitations arising from those fundamental conceptions of free government which underlie all constitutional systems.'

"We have no doubt that, because of the fundamental conceptions which underlie our system, any attempt by a State to measure the tax on one person's property or income by reference to the property or income of another is contrary to due process of law as guaranteed by the fourteenth amendment. That which is not in fact the taxpayer's income cannot be made such by calling it income. (Compare Nichols v. Coolidge, 274 U. S. 531.)"

In Heiner v. Donnan (285 U. S. 312), where a certain provision of the Revenue Act of 1926 was under consideration, particularly that part dealing with gifts inter vivos made within 2 years prior to death, the court, citing Schlesinger v. Wisconsin, supra, used this language:

"Nor is it material that the fourteenth amendment was involved in the Schlesinger case, instead of the fifth amendment, as here. The restraint imposed upon legislation by the due-process clauses of the two amendments is the same (Coolidge v. Long, 282 U. S. 582, 596). That a Federal statute passed under the taxing power may be so arbitrary and capricious as to cause it to fall before the due process of law clause of the fifth amendment is settled (Nichols v. Coolidge, 274 U. S. 531, 542; Brushaber v. Union P. R. Co., 2-10 U. S. 1, 24, 25; Tyler v. United States, supra (281 U. S. 504).

"Such a statute is more arbitrary and less defensible against attack than one imposing arbitrarily retroactive taxes, which this Court has decided to be in clear violation of the fifth amendment."

STATEMENT OF HON. KENT E. KELLER, M. C.

For many years the railroad workers had asked for a railroad pension law. Their representatives, the 21 labor executives had turned a deaf ear to this demand of the rank and file workers. The result was that in December 1930 the Railroad Employees National Pension Association was organized at Chicago, Ill. At the first meeting the officers of this organization were instructed to take the matter up with the 21 labor executives and attempt to induce them to put forward a national railroad pension bill. But the labor executives paid no attention to this request. The Railroad Pension Association, failing to induce their own representatives to take action for them, went forward with their own organization. More than 600 chapters were formed throughout the United States and the work of formulating a proposal for a pension was undertaken by the association, and an independent movement by the pension association was started all over the country in behalf of this idea.

In the fall of 1931 the pension association employed the services of Hon. Herman L. Ekern as counsel to draft the bill and he in turn employed Dr. Brooks, actuary and coworker. The officers of the pension association came to Washington to present the legislation, and induced Senator Brookhart to introduce the first bill on February 17, 1932, as Senate bill 3677. Two days later, as the result of the protest of the 21 labor executives against the introduction of this bill, it was withdrawn by Senator Brockhart. Thereupon Mr. Royster, president of the pension association, came directly to me, showing me letters from my own friends down in my district in southern Illinois, in which they sug gested to him that I be requested to introduce the bill in the House for the pension association.

It had been pointed out to Mr. Royster by my friends as their reasons for requesting me to introduce this bill, that I had announced in favor of a national railroad pension on January 29, 1930, in my speech on Unemployment,