Mr. HARRIS. Well, it is a matter of policy for the Congress to determine, is it not? Mr. HERLONG. I would think so. But I would like to hear some experts who have gone into this matter of the railroad retirement and know more about it than I do, to give their impressions on it. Mr. HARRIS. Yes. I think it will be developed that there are certain provisions with reference to income-tax payments in the Railroad Retirement Act which is not present in any of the social security retirement annuities. Mr. HERLONG. If you can make a distinction, that is wonderful. Mr. HARRIS. And it has, therefore, been done. It was done when the act was passed originally. I think that will be developed thoroughly during the course of the hearings. Thank you very much, Mr. Herlong. Mr. HERLONG. Thank you very much. Mr. HARRIS. We appreciate your statement. STATEMENT OF HON. HARLEY O. STAGGERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST VIRGINIA Mr. HARRIS. I see our colleague on this committee, our good friend, Mr. Staggers, sitting back there. I am sure he is vitally interested in this subject. Do you have anything that you want to say this morning? Mr. STAGGERS. Yes, Mr. Chairman. Mr. HARRIS. Of course, you are welcome up here with us. You are a member of the committee. Mr. STAGGERS. Mr. Chairman and members of the committee, I did not come over to testify, but I am glad to have this opportunity to say that I am wholeheartedly in support of H. R. 9065, the bill introduced by the chairman of this subcommittee. I have introduced an identical bill to this and I expect to support it when it comes before the full committee. I hope to be present at all of the hearings, in order to be able to discuss it when we do get it before the full committee and also be able to discuss it somewhat in detail when it hits the House floor. So I expect to be present. I do not want to take too much of your time. Mr. HARRIS. Thank you very much. Of course, you can take your place up here on the bench during these hearings, because you are a member of this committee and you are welcome to attend the hearings of this subcommittee. Mr. STAGGERS. Thank you. STATEMENT OF HON. CLEVELAND M. BAILEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST VIRGINIA Mr. HARRIS. We welcome our colleague, Mr. Bailey, who has always manifested an interest in the railroad-retirement bills. We are glad to have you with us again today. Mr. BAILEY. Mr. Chairman and members of the committee, for the purpose of the record, I am Cleveland M. Bailey, of the Third West Virginia District. I appear today in support of H. R. 9645, which is an exact duplicate of H. R. 9065, introduced by the presiding chairman of this committee today. Let me say, Mr. Chairman and members of the committee, that the intent of H. R. 9645 is to provide a badly needed 15 percent increase in benefits for thousands of retired pensioners, widows, and other beneficiaries under the Railroad Retirement Act. It will accomplish this with only minor exceptions which I shall endeavor to explain. You gentlemen of the committee will remember some 2 or 3 years ago, the Congress considered giving the railway employees a 25 percent increase in retirement pay. You will remember that the Congress, after granting a 20 percent increase in 1948, along in 1951 or 1952, considered further increasing the Railroad Retirement Act. At that time, as I recall, they were asking for a 25 percent increase. The committee voted a 10 percent increase and the taking of that action was predicated on the fact that there were some differences in the audits of the Railroad Retirement Board and the audits of the railroad workers, and the committee asked or provided for an independent audit, and I am advised that that audit indicated that we could have paid the 25 percent at that time rather than the 10 percent which we granted. The objective of this bill today is to pay that 15 percent which we could well have paid some 2 or 3 years ago. What we propose to do under H. R. 9645, and some three score or more other bills now pending in your committee, is to grant this 15 percent which could well have been granted at that time. In order to insure these increased benefits and keep the retirement trust fund in sound financial condition, the bill would raise the additional funds in the amount of 2 percent of all covered payrolls. Both the employee and the employer will pay an additional 1 percent, making their contribution 714 percent on the first $350 of monthly wages, instead of 64 percent, the rate being paid at the present time. The increased tax on employees would be immediately offset by exempting the employee's tax from gross wages in the computation of his income tax. We firmly believe such an exemption is fair and equitable since the employers already get credit on their corporation taxes for amounts paid into the retirement fund. We also point to the fact that workers in Canada and Great Britain already enjoy this exemption benefit. Now, there are two exceptions to the overall 15 percent increase, as referred to above. They are: 1. In the case of a beneficiary under the Railroad Retirement Act whose Railroad Retirement Act formula benefit is lower than it would have been had that person been covered by social security, this bill would not necessarily provide an increase. For example, if he were now entitled to $30 per month under the railroad retirement formula, but under social security would have been entitled to $60 a month, he now receives the $60. The 15 percent increase provided in this bill would raise his railroad retirement formula annuity to $34.50 per month. He would still receive the benefit of the minimum guaranty and full $60. On the other hand, if he were entitled to $80 under the railroad retirement formula and by the application of the minimum guaranty now received $85, he would receive an increase. This is because his railroad retirment formula entitles him to $92 per month. In simple terms, where the 15 percent increase provides a beneficiary with a benefit over the social security minimum, he receives the advantage of the increase. In cases where the 15 percent would leave a person below the minimum, he would continue to enjoy the present minimum guaranty protection. 2. This bill does not change the method of computing the spouse's annuity. The present law provides the spouse an amount equal to one-half the retired employee's monthly benefit, with a maximum allowable equal to the maximum provided by the Social Security Act. This section adopted just last year resulted in substantial increases for spouses. We do not feel that we are warranted at this time in seeking spouse's annuities in excess of those provided by the Social Security Act. It should be borne in mind that the family income of the spouse will be increased in the amount of 15 percent of the retired employee's annuity by this bill. Further, there will be a large number of spouses receiving an increase under this bill by reason of the increase in their husband's or wife's annuity. In conclusion, Mr. Chairman, may I suggest that this increase is long overdue, in view of the fact that our living costs have not been reduced and that they are quite an item in actual existence on the part of the employees of the railroad system, I sincerely hope that the members of the committee will give this legislation your careful and favorable consideration. Mr. HARRIS. Thank you very much, Mr. Bailey. We are very glad to have had your statement. Mr. BAILEY. Thank you. Mr. HARRIS. Are there any questions? Mr. DIES. I would like to ask Mr. Bailey a question. Mr. HARRIS. Mr. Dies. Mr. DIES. Is it not a fact that we passed a bill last session granting increases to retired Government employees, raising the annuities of all Government employees? Mr. BAILEY. We are not speaking of Government employees. Mr. BAILEY. Yes, sir, that is true. Mr. DIES. That was on account of the increase in the cost of living. Mr. BAILEY. That is right. Mr. Dies. I understand that this has nothing to do with Government employees, but I think there has been that precedent of increasing the annuities or retirements or whatever it may be, because of the increase in the cost of living. Mr. BAILEY. That is true. I now would like to make some comments on the question asked by the gentleman from Maine, Mr. Hale, of Mr. Herlong, who preceded me as a witness. I believe that we should approve section 5 of this bill which provides for an exemption of that part of the wage earner's wages that he pays into this retirement fund. It is a kind of compulsory social security. But I think it goes into a good cause. It is in accordance with that- Mr. HALE. It is a tax. Mr. BAILEY, I am speaking now of exemption of the tax. I believe that it should be offered as an inducement for them to have membership in this retirement fund and to create annuities in connection with their retirements, that will keep them off of the dole and keep them off the direct relief rolls. I think it is a good gesture. Mr. DIES. Well, going back to what I said: My understanding is that everybody who was on retirement, Government employees, had their retirement increased without paying anything more into the fund. I am a little hazy about that bill, but I know that it has passed and I know that some of them got 9 or 10 percent across the board; those who were already retired. Mr. BAILEY. That is true. Mr. DIES. There was no requirement whatsoever that they pay any additional amount into the fund. Mr. BAILEY. As I recall-and if I am wrong some member of the committee can correct me—we increased those to $1,400, I think. Mr. DIES. At any rate, they all got substantial increases from the fund without paying anything into the fund. Here you propose that they pay increases, but coupled with that a provision thatthey must contribute to the fund in order to get the increase. Mr. BAILEY. I recall that we did grant those increases. Mr. BAILEY. Increases to employees who were already retired, who were getting retirement payments. Mr. DIES. Yes, they got increases. However, I have forgotten, or I do not remember whether they were just given percentage increases, or we raised the exemptions. But I know that I read a detailed statement showing the result of the increase and it was a substantial increase across the board. Mr. HARRIS. Thank you very much, Mr. Bailey. We appreciate your views as you have always shown an interest in this subject. We are glad to have your statement. Mr. BAILEY. Thank you. STATEMENT OF HON. JAMES G. POLK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO Mr. HARRIS. Mr. Polk, of Ohio, is present. Mr. Polk, we will be glad to hear you. Mr. POLK. Mr. Chairman and members of the committee, for the record, I am Congressman James G. Polk, of the Sixth Ohio District. I am appearing before the committee this morning in behalf of the bill, H. R. 9564, which I introduced sometime ago. And may I say this is a companion bill to Chairman Harris' bill, H. R. 9065, and I want to appear this morning, strongly urging your committee to favorably report Mr. Harris' bill, which is identical with the bill which I introduced as H. R. 9564. I believe this is an increase that is long overdue and I strongly urge the committee to favorably report the bill without amendment. Thank you very much. Mr. HARRIS. We thank you very much. I will say to our colleague that we very much appreciate your interest in this program. It is a pleasure for me to know that so many of our colleagues are interested in doing something for the retired employees of the railroad industry, but yet keeping in mind that this fund must be kept on a financially sound basis, because so many thousands of our people are depending on it. Your bill, I notice, is H. R. 9564. Mr. POLK. That is right, Mr. Chairman. Mr. HARRIS. It will be included in the record of our hearings, showing your cosponsorship of the bill. Mr. POLK. Thank you very much. Mr. HARRIS. Are there any questions? Thank you very much. We are glad to have you here with us this morning, Mr. Polk. We will hear next from Congressman Friedel, who is a member of this committee. STATEMENT OF HON. SAMUEL N. FRIEDEL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MARYLAND Mr. FRIEDEL. Mr. Chairman and members of the committee, I had the pleasure of appearing before this committee on my bill, H. R. 3590, on January 24. I believe that H. R. 3590 is a good bill because it provides much-needed relief for the thousands of deserving retired railroaders and their families. However, during the testimony at these hearings it was brought out that the cost factor involved was too high, and therefore would have weakened the entire railroad retirement system. Since then, another bill has been introduced by the chairman of this subcommittee, H. R. 9065, which also provides relief for the railroader and his family, and which I believe has a better chance of being enacted. Convinced of the merits of this bill, I have introduced a companion measure, H. R. 9597. These bills include three main proposals which are stated here briefly: (1) These bills provide for a much needed increase of 15 percent in benefits for thousands of pensioners, widows, and other beneficiaries under the Railroad Retirement Act. (2) In order to pay for these increased benefits and maintain the railroad retirement fund on a sound basis, both of these bills would impose an additional 1 percent tax on the railroads and their employees. (3) The tax on employees would be immediately offset by exempting the employee's tax from gross wages in the computation of their income tax. Workers in Canada and Great Britain presently have such an exemption benefit. Under this amendment, most railway employees would ultimately be taxed less than they are now under the 614 percent tax, on the proposed tax of 74 percent under these bills. H. R. 9065, the original bill, and the many companion measures which have been introduced, including my bill H. R. 9597, are finding widespread support both in and out of Congress. I hope these bills will be favorably considered and reported by this committee and passed by the House and Senate promptly and enacted into law. Thank you. Mr. HARRIS. Thank you Mr. Friedel. The next witness is our colleague, Mr. Bennett of Florida. STATEMENT OF HON. CHARLES E. BENNETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA Mr. BENNETT. Mr. Chairman, some time ago I requested an opportunity for Mr. J. R. Taylor, grand president of the Grand Association of Veteran Railway Employees, Inc., to testify before your subcom |