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STATEMENT OF HON, HOMER D, ANGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON

Mr. ANGELL. First of all, I would like to commend the committee for the excellent work they have done in arriving at a solution of this very difficult problem, and apparently, according to the statement of the chairman, it is satisfactory to the employers and the employees in the labor group. I hope the bill may be brought up very soon, as the chairman said, and pass before the recess takes place.

I am appearing in support of H. R. 12, which I introduced early in the session. I have not had an opportunity to read H. R. 6766 because it is not available yet, and I am not, of course, advised as to whether the provision I am speaking of and seeking to forward is incorporated in your bill, Mr. Chairman. It is very simple. Let me read it:

An annuity shall accrue with respect to the month in which the annuitant dies;

except that if death occurs on or before the 15th day of such month, only onehalf of the annuity for such month shall be considered to have accrued.

My understanding of the law at present is that if an annuitant dies during the month, or even if he died on the last day of the month, the beneficiary would receive nothing for that month. Very frequently the moneys are already expended, anticipating that they would come in. It seems to me .. just that this bill should be enacted. As you will note, it provides that if death occurs before the 15th of o month, only one-half of the annuity for such month would be paid. I hope if that language is not covered by the bill that you have introduced, or the legislation, this bill, H. R. 12, will be reported out favorably. The CHAIRMAN. The bills are available, Mr. Angell. I say that for the benefit of the other members and for those in the audience. I assume, then, from your remarks with such reservations as you made, you feel inclined toward H. R. 6766. Mr. ANGELL. Yes. The CHAIRMAN. We will now hear from Congressman Van Zandt, of Pennsylvania.

STATEMENT OF HON. JAMES E. WAN ZANDT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA

Mr. WAN ZANDT. Mr. Chairman, I wish first to express my appreciation for the opportunity of appearing before you, and likewise I wish to join my colleague from Oregon in commending the committee for arriving at what I feel is a very acceptable solution to this problem. I think the majority of the committe are familiar with the fact that I represent a congressional district which includes the city of Altoona, Pa., where are located the largest railroad shops in the world, and on a percentage basis I think more of my constituents are workers for a railroad, and from the standpoint of retired men, I think that I have the largest percentage of retired men in the country.

They have been very patient during this period of the high cost of living and have tried to exist. Many of them today are barely existing.

Yesterday morning at 7:30, just prior to my departure from Altoona to Washington, I had a retired gentleman visit me, and he pointed out that he and his wife were living on what might be termed one meal per day, as a result of the meager retirement benefits that he was receiving. He pleaded with me to have the Congress do something to relieve not only himself but many others in my congressional district who are trying to exist on this meager pension. I introduced some months ago H. R. 5000 and later on H. R. 5759, and like the committee, I was working in the direction of a solution. I am willing to stand aside, as far as my bills are concerned, and support the bill that was introduced by the chairman yesterday. I have had a chance to analyze it. It meets my approval. It meets my approval because it will do the very thing that is necessary today; that is, provide relief for the retired railroad worker who, as I said a moment ago, is barely existing on the benefits he receives today. So, Mr. Chairman, I wish to place the stamp of my approval, if it means anything to the committee, on H. R. 6766 and only hope that the Congress will enact this bill before we adjourn on the 19th of June. The CHAIRMAN. We appreciate having your statement, Mr. Van Zandt. We know that you have been interested in the subject over a long period of time, and the committee does appreciate your expression of support. Mr. Priest, I notice on the list there is a bill that you introduced. Do you have anything that you wish to say?

STATEMENT OF HON. J. PERCY PRIEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE AND A MEMBER OF THE COMMITTEE

Mr. PRIEST. When I was in my district last Christmas followin our special session, I met with about 300 annuitants, retired railroa men in my district, and had quite a session with them, during which they discussed very frankly the difficulties that they were having making ends meet on their present annuities. I decided then that something should be done, and upon returning here I introduced a bill, a very simple bill, providing for $100 minimum annuity. I have gone over the bill proposed by the chairman and Mr. Crosser. I am in full agreement with the bill. I think that something should be done, and I very gladly withdraw my bill from consideration in order that the committee might concentrate its efforts on reporting the bill introduced yesterday.

The CHAIRMAN. Thank you, Mr. Priest. h Are there any other Members of Congress present who wish to be

eard?

I might say that I, likewise, have introduced one or two bills on this subject that I thought were just about the finest things that had ever been prepared. I can assure you in the preparation of those bills I gave an awful lot of thought and consideration. I had the very valuable help of our staff, who worked in season and out in an effort to get what we considered a bill that would meet the requirements of our railroad workers.

However, I realize again, as I have so often realized that others can have thoughts different from my own that are still worthy of

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support. So notwithstanding the fact that the bill that bears my name is one that I am very proud of, I am pleased in these circumstances to say that I will give my wholehearted support to the bill which I introduced yesterday which represents the agreement between the brotherhoods and the railroads. I have every confidence that the plan agreed upon is in the public interest and certainly not harmful in any sense, in my opinion. I see that Mr. O'Hara would like to say something.

STATEMENT OF HON, JOSPEH P. O'HARA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA AND A MEMBER OF THE COMMITTEE

Mr. O'HARA. On April 29 I introduced H. R. 6397. The problem which has been outlined by the chairman and other Members of Congress who have spoken has had my consideration for some time. I have some witnesses who are here, at least one, and I would like for him to have an opportunity to give some testimony with reference to this bill so that the committee may consider it, and I cast no reflection upon H. R. 6766. The CHAIRMAN. What is the gentleman's name? Mr. O'HARA. Mr. Stack. The CHAIRMAN. I see Mr. Stack's name on the list of witnesses. The first witness this morning will be Mr. Carter Fort, representing the Association of American Railroads.

STATEMENT OF CARTER FORT, VICE PRESIDENT AND GENERAL COUNSEL, ASSOCIATION OF AMERICAN RAILROADS

Mr. ForT. Mr. Chairman and gentlemen of the committee, it is always a pleasure for me to appear before this committee. For the record perhaps I should say that my name is Carter Fort, and that I appear here for the Association of American Railroads of which I am vice president and general counsel. That association, as you know, is a voluntary organization of railroads which includes in its membership companies operating 95 percent of the class I mileage of the country and having about 95 percent of the total class I railroad revenues. The Chesapeake & Ohio lines are not included in the railroads for which we speak in legislative matters. I shall take only a few minutes of your time today. Representatives of the Association of American Railroads and representatives of the Railway Labor Executives Association have agreed upon amendments of the Railroad Retirement Act and the Railroad Unemployment Insurance Act, and have agreed jointly to sponsor a bill proposing such amendments. Such a bill was introduced in the House yesterday by your chairman and was numbered H. R. 6766. An identical bill, S. 2782, was introduced in the Senate yesterday by Senators Taft and Ives. I shall call your attention briefly to the changes which H. R. 6766 would make in the present law. First, however, I should say that the agreement reached by the American Association of Railroads and the Association of Railway Labor Executives was, like most agreements, a result of give and take. Both sides believe that the amendments to the Railroad Retirement Act and the Railroad Unemployment Insurance Act, which are proposed in H. R. 6766, when those amendments are taken together, represent an improvement in the present law. Some of the provisions of the bill we would not favor unless they were coupled with other rovisions of the bill, and this is true also, I believe, of the Railway }. Executives Association. In other words, we support the provisions of the bill, as a unit—as a whole—and we would not support the bill if it were modified in such a way as to omit certain important provisions. Coming now to the changes which the bill would bring about in the existing statutes: In the first place, the bill would so amend the Railroad Retirement Act as to increase all retirement annuities and pensions by 20 percent, and would further amend that act so as to restore so-called death benefits such as were provided originally in the act of 1937 and eliminated by the amendments of 1946. The provisions dealing with death benefits are designed to make it certain that an employee or his survivors will receive in benefits not less than the employee has paid in pay-roll taxes, with an allowance for interest. No doubt this feature will be discussed by Mr. Schoene speaking for the Railway Labor Executives Association, who will, as I understand, follow me. In the second place, the bill would amend the Railroad Unemployment Insurance Act in such a manner as to substitute for the present flat 3-percent pay-roll tax, paid by the railroads, a graduated scale of taxes, ranging from one-half of 1 percent to 3 percent, dependin upon the amount of railroad unemployment insurance account as # September 30 of each year. If you will look at page 5 of H. R. 6766 you will see the graduated scale tax which is proposed. You will observe that at any time the unemployment insurance account falls below $250,000,000, the tax will be 3 percent—the same as now—but as the amount of reserve account rises the tax rate decreases until it becomes one-half of 1 percent as the minimum, when the account is $450,000,000 or more. The present flat 3-percent tax has proved to be grossly excessive. For the year ending June 30, 1948, that tax will produce about $145,000,000 and interest on the account will produce more than $15,000,000 more, making total income of about $160,000,000, which will be about $100,000,000 more than the $60,000,000 necessary to pay all benefits under the act, including both unemployment and sickness. This flat 3-percent pay roll tax has been so excessive from the very beginning that, in a period of less than 9 years, it has resulted in the accumulation of an unemployment surplus reserve account of more than $900,000,000, and the account continues to grow with every tax collected. The fund is now so large that it has lost all relationship with any conceivable need. The bill follows a very conservative course with respect to unemployment insurance taxes. . The graduated tax rate it provides would, in effect, give the railroads a certain amount of credit as to future taxes for the excessive taxes paid in the past until such time as the reserve account should be reduced to a reasonable level and then would measure the taxes by the actual needs and requirements developed by experience. Thus, the graduated scale would provide at all times a wide margin of safety, since the tax rate, would automatically go. up if necessary to protect or provide an ample reserve account. The bill, in providing a method of adjusting the unemployment tax of railroads to actual needs does only what has been done with respect to corresponding taxes which are paid by employers in other industries, including the competitors of the railroads, under the State unemployment insurance systems established as the result of the general Social Security Act. There are 51 such so-called State systems, including those applicable in Alaska, Hawaii, and the District of Columbia. In 50 of the 51 State systems the taxes are based on a merit or experience rating. These systems apply the principle of varying the tax for the support of the unemployment insurance system in accord with what experience demonstrates to be adequate for the purpose intended. There is, therefore, nothing novel about the proposal that a graduated rate of tax be payable by employers under the railroad unemployment insurance system. Such a proposal is in accord with the general principle which has received practically universal acceptance. All the State systems were set up as the result of the general Social Security Act passed by the Congress, and one of those systems, that for the District of Columbia, was established in its entirety by Federal legislation. In the District of Columbia the minimum tax rate is one-tenth of 1 percent, disregarding the three-tenths of 1 percent tax payment to the Federal Government for administrative expenses. In 24 of the State systems the minimum rate, not including the three-tenths of 1 percent payable to the Federal Government, is one-half percent or less, and in 44 State systems the minimum is 1 percent or less. The failure in the past to provide for the railroads a self-adjusting tax rate, reflecting actual experience and actual requirements, such as has been provided for all other industries, is, of course, for the excessive taxes upon the railroads in the past and the accumulation of the present swollen railroad unemployment insurance account. Before closing, perhaps I should add a few words concerning the background which led to the agreement reached between the Association of American Railroads and the Association of Railway Labor Executives. During this Congress a great many bills have been introduced which would amend the Railroad Retirement Act or the Railroad Unemployment Insurance Act, or both. Some 20 or more of bills of this character are now pending before your committee, I believe. These bills run through a wide range. Some of them would work an outright repeal of the so-called Crosser Act, and in that way reduce or eliminate certain benefits which the men are now receiving; others would increase pensions and retirement annuities in a manner which would threaten the safety of the retirement system; others would increase the so-called survivors' annuities and others would increase unemployment and sickness benefits; others would do away with sickness benefits and change the unemployment insurance taxes. Without more, it may be said that one or another of the pending bills would make almost every conceivable change in the railroad retirement system and the railroad unemployment insurance system.

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