3. Railroad unemployment insurance account.-Ninety percent of the contributions will be deposited in the railroad unemployment insurance account, to be maintained, like the State unemployment compensation accounts, by the Secretary of the Treasury in the unemployment trust fund established by section 904 of the Social Security Act.

Provision is also made for the transfer to the railroad unemployment insurance account from State unemployment compensation accounts of the balance of the amounts paid to them by the employers covered by this bill.

The railroad unemployment insurance account can be used solely for the payment of benefits.

4. Railroad unemployment insurance administration fund.-Ten percent of the contributions, together with any additional appropriations which Congress may make, will be maintained in the Treasury as the railroad unemployment insurance administration fund, to be used solely for the payment of administrative costs.

If this fund has excessive balances after 1946, such part thereof as the Railroad Retirement Board deems proper may be transferred to the railroad unemployment insurance account.

5. Qualifications for benefits.-An employee of a covered employer will be qualified to receive benefits (a) Prior employment: If, within the appropriate preceding calendar year, he had earned $150 or more from covered employment; (b) Waiting period: If within 6 months preceding the beginning of any benefit year, he had had 15 consecutive days of unemployment of 2 half-months in each of which there were 8 days of unemployment, for which benefits were not paid.

6. Disqualifications.-An employee will be disqualified for benefits for defined periods of 15, 30, 45, and 75 days for such reasons as unavailability for suitable work, refusal to accept suitable work, voluntarily quitting without good cause, discharge for misconduct, and the making of fraudulent claims for benefits.

An employee will also be disqualified for benefits, while on a strike in violation of the Railway Labor Act or of the rules of his labor organization; while in receipt of an annuity or pernsion under the Railroad Retirement Act, or old-age insurance under title II of the Social Security Act, or unemployment benefits under any State unemployment compensation law; and during any month (or half-month) during which he performs 50 percent (25 percent) of the maximum employment allowable to him under a contract of employment providing for the determination of his compensation, wholly or partially, on a mileage basis.

7. Benefits.-Benefits will be paid for each day of total unemployment in excess of 7 during any period of 15 days, in an amount ranging from $1.75 to $3 according to the employee's total earnings from covered employment in a preceding calendar year. The maximum total amount of benefits payable to any employe during a period of 12 months will be 80 times his so-called "daily" benefit amount. Benefits are paid on a "daily" basis for administrative convenience. They are paid for days of unemployment in excess of 7 in order not to pay benefits to a worker who has earned about 50 percent of his normal semimonthly wage. Translated into more customary terms, the rates range from $14 to $24 per halfmonth of total employment; the maximum duration is a flat 5 months. The benefit schedule is reproduced below:

8. Administration.-(a) General: The plan is to be administered by the Railroad Retirement Board, which is given the necessary powers, among which is that of appointing, subject to civil-service rules and regulations, a director of unemployment insurance at a salary of $10,000 per year.

The Board is authorized to establish special employment offices for railroad workers and to enter into arrangements with employers, labor organizations, State unemployment compensation and employment service agencies, and others to assist in its work, particularly that of registering the unemployed for work and receiving claims for benefits, and to pay for such service.

(b) Claims for benefits: Duly-authorized employees of the Board make the first determination on any claim for benefits. From this determination a worker may appeal to a district board, consisting of one representative each of the Board, of employees and of employers. The Board may review the decisions of the district boards, or permit a worker to appeal such a decision to the Board itself. After all administrative remedies within the Board have been exhausted, any claim may be appealed to the Federal courts.

(c) Reciprocal arrangements with other unemployment compensation agencies: With respect to workers who have been employed both by railroad and nonrailroad employers, the Board is authorized to enter into arrangements by which (a) if a State agency pays benefits to such workers, in part on the basis of their railroad employment, the Board will equitably reimburse the State agency, or (b) if the Board pays benefits to such workers, in part on the basis of their nonrailroad employment, the State agency will equitably reimburse the Board.

(d) Advisory councils: The Board may appoint, without compensation, national or local advisory councils of representatives of employers, employees, and the public to discuss problems in connection with the administration of the plan and to help in the formulation of policies.

9. Social Security Act and Social Security Board.-(a) Title III: Section 303 is amended by providing that the Social Security Board shall make no certification for payment of an administrative grant to any State unemployment compensation agency if it finds that the agency (1) does not make its records available to the Railroad Retirement Board or (2) does not afford reasonable cooperation to every Federal agency administering an unemployment insurance law.

(b) Title IX: Sections 904 (a) and 904 (e) are amended to provide for the railroad unemployment insurance account in the unemployment trust fund. Section 907 (c) is amended to exempt employment covered by this bill from the title IX tax.

(c) Transfer from State funds: The Social Security Board is directed to determine, by agreement with the Railroad Retirement Board and after consultation with each State, a rough approximation of the balance of the amounts collected by each State unemployment compensation fund prior to November 1, 1939, from employers covered by this bill. Unless a State shall direct the Secretary of the Treasury to transfer this balance to the railroad unemployment insurance account, the Social Security Board shall deduct this amount from its administrative grants to the State, until the total balance has been so deducted, and certify such amount for deposit in the railroad unemployment insurance account. Notwithstanding the present restrictions in sections 303 (a) (5) and 903 (a) (4) of the Social Security Act, the State may then withdraw from the unemployment trust fund the amounts which the Social Security Board finds to be necessary for proper administration of its unemployment compensation law.

10. District of Columbia Unemployment Compensation Act.-The District of Columbia Unemployment Compensation Act is amended, effective July 1, 1939, to exclude employment as defined in this bill from coverage both for contribution and benefit purposes and to direct the Secretary of the Treasury to make the transfer of the amount required to be transferred to the railroad unemployment insurance account.

11. Transitional provisions.—These provide that if a worker has started a benefit year under a State law between July 1, 1938 and June 30, 1939, he shall be eligible during the balance of such year to receive benefits under this bill; (a) If qualified as of July 1, 1939: At the rate to which he is entitled under this bill, until he has drawn, including the amounts already received under the State law, the maximum payable to him under this bill; (b) If not qualified as of July 1, 1939, but solely because of the passage of this bill, is ineligible to continue to receive benefits under the State law: At the minimum rate herein provided until he has drawn the balance of the benefits which he would otherwise have been entitled to under the State law.

The CHAIRMAN. We have a report on this bill from the Treasury Department. If there is no objection, we will insert it in the record without reading.

(The report referred to is as follows:)

Hon. CLARENCE F. LEA,

TREASURY DEPARTMENT,
Washington, April 26, 1938.

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives.

DEAR MR. CHAIRMAN: Further reference is made to your letter of April 5, 1938, enclosing two copies of bill H. R. 10127, "to regulate interstate commerce by establishing an unemployment insurance system for individuals employed by certain employers engaged in interstate commerce, and for other purposes, and requesting a statement of this Department's views on this proposed legislation.

The proposed bill would exempt employers, as defined therein, from incurring liability for taxes imposed by title IX of the Social Security Act after June 30, 1939. In lieu of those taxes the bill (sec. 8) would require the employers to pay contributions based upon wages payable to their employees. Those contributions would be collected by the Railroad Retirement Board and deposited by it with the Secretary of the Treasury, 90 percent to the credit of the account (as defined in sec. 1 (p)) and 10 percent to the credit of the fund (as defined in sec. 1 (q)). Out of the account the Railroad Retirement Board would pay the unemployment benefits provided for in the bill, and out of the fund it would pay its administration expenses. Section 13 (b) then provides that the provisions of the bill for the payment of unemployment benefits shall be exclusive and that no employee shall have or assert any right to unemployment benefits under an unemployment compensation law of any State with respect to unemployment after June 30, 1939. It is further declared that the application of State unemployment compensation laws after such date to employment covered by the bill would constitute an undue burden and interference with the effective regulation of interstate commerce. The bill is thus designed to establish a system of unemployment compensation benefits for railroad workers separate and distinct from the unemployment compensation systems which have been established by the several States as contemplated by Congress when it enacted title IX of the Social Security Act.

The most fundamental question raised by the bill is as to the widsom of separating the railroads and their employees from the system of unemployment compensation which is now in operation under the provisions of the Social Security Act. The fact that benefits payable to employees under the bill are more liberal than those under State plans now in operation, together with the fact that there is no increase in contribution rates, indicate either one of two things: (a) That railroad employees are a better "risk" than the average employee covered by an unemployment-compensation plan, or (b) that if (a) is not true, there will in the future be strong pressure for appropriations out of the Treasury to avoid a deficit in the account created under the bill. The Treasury Department is not in a position to express a view upon this major question raised by the bill; this question concerns primarily the Social Security Board and is one upon which that Board is in the most advantageous position to comment. However, this Department wishes to call attention to the possible serious consequences from a fiscal standpoint and otherwise, of a policy either of removing the better "risks" from our system of social insurance and setting them up in systems of their own, or of making provision for greater benefits than presently enacted revenue provisions will sustain.

In connection with the proposed attempt, as provided in the bill, to recoup from the States the amounts already paid into State funds by employers, as defined in the bill, to transfer these amounts to the account created under the bill and to cut off further benefit payments under State laws, this Department also believes that the Social Security Board is in a better position to comment. This Department is concerned, however, with respect to the possible constitutional question involved in these proposals, the probable serious effect that such action would have upon the financial stability of the various State funds, and the adverse reaction of States to the coercive methods proposed to be employed in order to effect this recoupment.

Section 8 (a) of the bill requires every employer to pay a contribution, with respect to having employees in his service, equal to 3 percent of so much of the compensation as is not in excess of $300 payable by him to any employee for any calendar month. Section 8 (b) requires each employee representative to pay, with respect to his income, a contribution equal to 3 percent of so much of his compensation as is not in excess of $300 paid to him for services during any calendar month. Presumably the contributions are intended to be taxes, imposed under the taxing power of Congress under the Constitution, because, with respect

to the collection of the contributions, provisions of law applicable to the collection of taxes imposed by sections 600 and 800 of the Revenue Act of 1926 are made applicable. It is suggested in passing that if a tax is intended, it may be found advisable to avoid some controversy or doubt on this important matter by levying a tax, expressly designated as such.

Section 8 (h) after providing that provisions of law with respect to taxes imposed by sections 600 or 800 of the Revenue Act of 1926 shall be applicable, insofar as not inconsistent, to the contributions, contains a proviso that all authority and functions conferred by such provisions upon any officers or employees of the United States, except the authority to institute and prosecute criminal proceedings, shall be vested in and exercised by the Railroad Retirement Board or such officers and employees of the Board as it may designate. Similar authority is granted in section 2 (g) in the case of payments required of employers when benefits are paid with respect to a period for which it is later determined that remuneration was payable. This would confer upon the Board, or any of its designated officers and employees, all powers now conferred upon the Secretary of the Treasury, the Commissioner of Internal Revenue, and collectors by internal revenue laws applicable generally or in the case of taxes imposed by the sections mentioned. For example, the provisions of internalrevenue laws relating to compromise of civil and criminal cases, examination of books and witnesses, liens for taxes and their enforcement, penalties, returns, assessments, and refunds and credits are apparently intended to be made available to the Railroad Retirement Board or its designated employees in the same manner as they are now available to the Secretary, Commissioner, and collectors in connection with internal-revenue taxes. Unnecessary duplication of facilities and functions, and possibly conflict in administrative policies and interpretations developed under the same provisions of law, will result, if another agency is permitted to function, even in a limited field, in the tax-collection activities of the Federal Government. In this connection the result is the same even though the contributions are not intended to be, and are held not to be, taxes. This Department is opposed to the collection of taxes or to the collection of contributions or other payments (even though not taxes) under provisions of law relating to taxes, by any other agency than the Treasury Department notwithstanding the fact that the proceeds are to be devoted to carrying out the functions for which such other agency was created.

The Treasury Department is also opposed to the proposal that a special fund be established for meeting costs of administration. There is no apparent reason why 10 percent of the amounts collected under the bill should not be covered into the general fund of the Treasury as are the similar receipts now collected under title IX of the Social Security Act. The Treasury Department favors the payment of administrative costs through the medium of annual appropriations out of the general fund of the Treasury. In this manner, the amount to be expended may be justified currently to the Congress, and the possibility of an unwarranted drain on the Treasury may be minimized. This Department is particularly opposed to that provision of the bill which would add to the proposed fund for administrative costs, the amounts collected from employers (as defined in the bill) during past years. These amounts have, of course, been covered into the Treasury and have already been expended for general governmental purposes. Such purposes included, among others, grants to States under title III of the Social Security Act to assist them in administering their unemployment compensation laws.

It is noted that section 10 (b) of the bill would authorize the Railroad Retirement Board to distribute benefit payments. This Department believes that the handling of checks and other media of payment by the same officer or agency that certifies to the correctness of such payments is an unsound procedure and one which should not be countenanced by the Congress.

In connection with the provisions of section 10 (a) of the bill, relating to the account for payment of insurance benefits, this Department fails to see any warrant for the concluding sentence which reads as follows:

"Notwithstanding any other provision of law, all moneys credited to the account shall be mingled and undivided, and are hereby permanently appropriated to the Board to be continuously available to the Board without further appropriation, for the payment of benefits and refunds under this Act, and no part thereof shall lapse at any time, or be carried to the surplus fund or any other fund." No similar language is employed in title IX of the Social Security Act. There is no necessity for an appropriation inasmuch as the funds involved will not be covered into the Treasury. It is the view of this Department that the language used in this connection should conform as closely as possible to that used in title IX of the Social Security Act.

In view of the foregoing, the Treasury Department recommends that the bill (H. R. 10127) be not enacted into law.

The Department is advised by the Bureau of the Budget that the proposed legislation would not be in accord with the program of the President.

Very truly yours,

WAYNE C. TAYLOR, Acting Secretary of the Treasury.

STATEMENT OF THOMAS C. CASHEN, PRESIDENT OF THE SWITCHMEN'S UNION OF NORTH AMERICA, 3 LINWOOD AVENUE, BUFFALO, N. Y.

The CHAIRMAN. Mr. Cashen, how many witnesses have you this morning?

Mr. ČASHEN. Judge Hay will probably be the only witness we will put on today.

The CHAIRMAN. Very well. You are going to make a statement, are you not?

Mr. CASHEN. Yes, sir.

The CHAIRMAN. You may proceed.

Mr. CASHEN. My name is Thomas C. Cashen of 3 Linwood Avenue, Buffalo, N. Y. I am president of the Switchmen's Union of North America, but I appear before your committee today as the chairman of the committee on unemployment insurance of the Railway Labor Executives' Association. I speak, therefore, not only as a railroad man myself, not only for the members of my own organization, but also for the 20 standard railway labor organizations, which include in their membership substantially all of the approximately 1,000,000 railway workers in the United States.

To conserve the valuable time of your committee, we have prepared for each member, a summary of the major provisions of the bill and an outline of the reasons why we favor its passage.

Mr. CROSSER. Do you want to finish your statement without interruption, Mr. Cashen?

Mr. CASHEN. I refer to that a little later, Mr. Crosser. I shall therefore make this opening statement very brief. It would be better at this time not to enter into the discussion of the technical features of the bill. I should like to suggest, therefore, that your committee defer any questions until I have completed my statement, which will tell you about the background of this legislation and about one or two of the main reasons why the railway workers of this country want it enacted.

Mr. EICHER. Mr. Chairman, in line with the witness's suggestion, I make a motion that the committee withhold any questions until after all of the witnesses have concluded their statements.

The CHAIRMAN. Is there any objection to that procedure? If not, we will proceed by that method.

Mr. CASHEN. Following me, Judge Hay will discuss the provisions of the bill, in whatever detail you think necessary, and we will introduce a few expert witnesses who are specially qualified to assist the committee in its deliberations on this subject.

About 2 years ago the Railway Labor Executives' Association began to work on this type of protection against the increasing hazard of unemployment, and discussed the problem with the Association of American Railroads. We had a bill drafted along the general lines