Mr. LYNCH. What is your conception of a vendor? And what s a newsboy?

Mr. MITCHELL. The newsboy I am thinking of is the casual youngster who comes in and makes a contract with a newspaper and purchases a few papers and goes out and sells them.

Mr. LYNCH. Well, now, do not take that viewpoint. But if that is the viewpoint you are taking, then I want you to know that when I refer to a newsboy, I am talking about the newsboy, for instance, who is out in the front of my building in New York, who has been there for years, and who sells about 500 papers a day. He is on his own.

The license that he gets is issued to him, and not to the newspaper. The place where he does his business is in his name.

Now, as I say, I am strong for social security, but here is a point that I just cannot see. I do not see any excuse for it.

Mr. MITCHELL. I would say that where it is demonstrated by the circumstances in the individual case, or the general method of doing business in that particular community, then under the legal decisions that have been made, the Hearst case, and so on, where it is demonstrated in those situations that the relationship of employer and employee does not exist, they would be excluded.

Mr. LYNCH. Well, you do not want all these people to go and have their position adjudicated in the courts, as to every individual case. It seems to me that the sensible thing would be to adopt a policy that would be in accordance with the facts.

I mean, how can you possibly take the position that you do, in view of the fact that the Internal Revenue Department cannot deduct its withholding tax? I do not say that because they cannot do it, you are wrong, but it would certainly indicate to me that you have gone much farther than was ever intended.

Mr. MITCHELL. I am concerned primarily because to exclude a group of people who otherwise would be included, would be moving against the stream, in the first place, in this respect: That you are dealing with a group whose conditions of employment become rather similar to other groups. And by progressive steps, one by one, we might be setting a precedent in the exclusion of this group that would be picked up by others, and the sum total of which would be exclusions of substantial numbers.

Mr. LYNCH. If that is so, Mr. Mitchell, then it is the fault of your organization for including those who were not intended to be included. You are including those who were not intended to be covered.

And we are not excluding them. We are just telling you that you made a mistake; and, if we pass this legislation, not to do it again. Because to take one little group of self-employed individuals, and put them under coverage seems to me rather irregular.

That is certainly true as to this case, and if all these other cases are similar, and if the New York cases are really stronger than this case, then it seems to me that you should abandon the theory that everybody should be covered, and you should go back to the theory that you should cover those whom it was the intent of Congress to have covered.

The CHAIRMAN. Will you permit an interruption?

Mr. LYNCH. Certainly.

The CHAIRMAN. Mr. Cohen, were you connected with the first social security set-up? You appeared, as I recall, 10 or 12 years ago.

STATEMENT OF WILBUR J. COHEN, TECHNICAL ADVISER TO THE COMMISSIONER, SOCIAL SECURITY ADMINISTRATION, WASHINGTON, D. C.

Mr. COHEN. It is 12 years now.

The CHAIRMAN. Do you recall that this particular point was raised at that time?

Mr. COHEN. No, I don't, Mr. Knutson.

The CHAIRMAN. I do, of course, being a publisher. And Dr. Witte assured us that newsboys would by no stretch of the imagination be brought under social security as employees of newspapers.

Mr. COHEN. I just have the contrary opinion, Mr. Knutson, for this reason:

As you will remember, in the 1939 amendments

The CHAIRMAN. I am not talking of 1939. I am talking of 1935, when the legislation was originated.

Mr. COHEN. That is right. But in 1939

The CHAIRMAN. Let us deal with 1935, if you do not mind. It was quite generally understood that newsboys would not be included. We had long and extended hearings. We went into every detail. And we were assured by Dr. Witte that by no stretch of the imagination could coverage be given to newsboys, who bought their product from a newspaper.

Nineteen hundred and thirty-nine is something else again. I want to start in at the genesis of this legislation. I would like to ask Mr. - Mitchell a question now, because Mr. Lynch brought it up, and I thought it very apropos.

If newsboys are employees of newspapers, why not apply the withholding tax to them?

Mr. MITCHELL. I am not competent to answer that question, Mr. Chairman.

The CHAIRMAN. Well, we withhold 20 percent of every employee's pay envelope for income-tax purposes. Let us just go into this a little bit in detail. I like details. I am sure you do.

Why do they not withhold 20 percent? Mr. Lynch raised that point, and I thought it was very, very pat. Let us explore it a little bit. You cannot make fish of one and flesh of another, you know. If this boy is an employee of a newspaper, why do we not apply the withholding tax to him?

Mr. MITCHELL. I presume that the Treasury Department has given it consideration, and has concluded that the withholding tax does not apply in that situation.

The CHAIRMAN. Then, of course, he is not the employee, because the law is very specific that if he is an employee 20 percent of his pay must be withheld.

Now, how do you square your contention with the Treasury Department's contention? After all, there is one Government, you know, and you should be in harmony.

Mr. MITCHELL. I understand that the Treasury Department held them subject to the social security tax.

The CHAIRMAN. Then why did they not impose the withholding tax? They are negligent.

Mr. MITCHELL. I am sorry. That question would have to be posed to them. I do not know on what basis they did that.

The CHAIRMAN. Then how should they apply the withholding tax? A boy buys a hundred papers for $2, and he goes out and sells them for $5. Then he would be subject to a $1 withholding tax, would he not, assuming that he sold all of them?

Now, let us assume that he sold only half of them. Can you not see what an interminable burden you would place on the Government in the way of bookkeeping?

You know, to me, Mr. Mitchell, the whole thing is just so absurd, that it is laughable. I am surprised that such a magazine as Judge has not written it up.

But we will be glad to hear from you further, because the court has an open mind.

Mr. MITCHELL. Well, I think that the substance, really of the remarks that I wanted to make have been covered in the discussion we have had, except that I would like to make this point:

The bill provides that the exclusion under the social-security programs be retroactive to 1940. This provision raises a number of questions concerning which serious difficulties, principally administrative difficulties, can develop.

If the bill is enacted into law, we recommend that it be revised so that the intent of Congress with respect to these questions will be clearly expressed.

The first of those, for instance, would be: Would people drawing benefits based on wage records, which include employment after 1939, as news vendors, be required to reimburse the Government for amounts received on the basis of such employment?

You see, there are people already drawing benefits, and those benefits have been calculated at least in part, upon employment which would now be deemed to be uncovered. And the question raised here is one of a number of questions of this general type.

Mr. GEARHART. How many in that classification have you on your books?

Mr. MITCHELL. I don't know.

Mr. GEARHART. As a matter of fact, the whole country has denied this relationship, this taxable relationship. You do not have anybody on the rolls yet, do you?

Mr. MITCHELL. Yes, sir. We know that there are some where this particular circumstance applies.

Mr. GEARHART. There might be a handful, but they are of no consequence in numbers, are they?

Mr. MITCHELL. They probably are small in number, but they do raise questions as to the accuracy of the records that we are maintaining, the benefit rights that may accrue, the benefit rights that have accrued.

Mr. GEARHART. Well, if you are in a mess to some extent on account of this, who got you into it? You did yourself.

The CHAIRMAN. Maybe the court did.

Mr. GEARHART. No, this court decision is not so old as that.

Mr. LYNCH. It is a recent decision.

The CHAIRMAN. Well, I want to give the social-security people the benefit of the doubt.

I would like to ask you one question, Mr. Mitchell.

Suppose a news vendor on Broadway sells the Times and the Herald Tribune, the Sun, and the Telegram, and all of the other

papers. And let us say that he sells Life magazine, Time, Newsweek, and many other magazines.

Just whom is he an employee of; or is he an employee of all of them; and would he get unemployment benefits as a result of being an employee of all of them?

Mr. MITCHELL. We feel that that type is probably self-employed, and this would exclude him.

The CHAIRMAN. What is the difference? Mr. Lynch tried to bring that out. What is the difference between a man who has a little shed, a little shack on Broadway, to keep the rain off his papers and the poor devil who is running up and down the streets hawking his papers? What is the difference? They are both self-employed, are they not. One is more comfortable in his situation than is the other; that is the only difference.

I am not trying to argue with you. I am seeking light.

Now, maybe you can sell me on the idea that the position of your social security people is right, but for the moment I have not seen the ray of light.

Mr. MITCHELL. I wonder if you would permit Mr. Willcox to comment on the conditions that suggest to the attorneys whether there is or is not coverage?

The CHAIRMAN. Well, if Mr. Willcox can show us the difference. between the boy who is out in the open on his own and the one who stands under a little cover and sells all kinds of newspapers and magazines, then I think he is wiser than Solomon.

STATEMENT OF ALANSON W. WILLCOX, ASSISTANT GENERAL COUNSEL, FEDERAL SECURITY AGENCY

Mr. WILLCOX. Mr. Chairman, I make no pretense of being able to answer all of these questions, but I would like to present this briefly, if I may:

One of the most difficult problems in the administration of the social-security program is just the one that is facing the committee tonight; that of distinguishing between the employee and the selfemployed individual.

There are all sorts of shadings and degrees, and it is not confined to the newspaper business by any means. It has been one of our major administrative problems.

As you will remember, the Congress has never defined what is meant by "employment."

Mr. SIMPSON. When you hit these close ones, why do you not come back to Congress to get an explanation of them?

Here we

Mr. WILLCOX. We hit them every day in the year. Mr. SIMPSON. Why do you not come back once a year? are now with this case, where we may have collected money which we do not have a right to collect, promising to pay benefits, and it is clear you have acted against the desire of Congress.

You tell me there are many close cases. How many of them are there where you have done this without any right to do it? And why do you not come in to us periodically and say, "Here is a close one?" As I recollect, you have never once come in and asked for an explanation of this type of a situation. You go right ahead and act on your own and you take a chance that the individual will pay it in

and establish a policy of paying it in. You create a liability for which we are responsible. And you do not know just what Congress meant. I cannot see why you do not come to us and have those points clarified.

Mr. WILLCOX. We have tried to, sir.

Mr. SIMPSON. When? I do not recollect that.

Mr. WILLCOX. In 1939, the committee adopted an amendment on this very subject. It was finally struck out by the Senate, and in conference.

Mr. SIMPSON. Then you went ahead and decided it yourself.
Mr. WILLCOX. We have to decide them, sir.

Excuse me. I do not mean to be dogmatic about it, but we have a great many difficult problems in this field. We are just as much to be criticized if we deny benefits where they are due, as if the Government tries to collect taxes where they are not due.

We have used our best judgment, and not infrequently we have guessed wrong, and the courts have told us we are wrong.

There are three cases pending before the Supreme Court now on this general question. We very much hope that those decisions will give us further guidance, because we have been faced with a very difficult problem.

It may be, as this committee seems to feel, that we guessed wrong on this case. In commenting on that, I would only like to point out that in the first place the fact that the Bureau of Internal Revenue and our agency have held certain groups of vendors to be covered does not mean that we hold all of the cases to be covered that some of the members of the committee have referred to.

I would like also to point out that under the Labor Relations Act, the United States Supreme Court has held certain newspaper vendors to be covered.

Mr. LYNCH. That is what you are following in this case?

Mr. WILLCOX. Well, the district court reached the same result in this case.

Now, we may be wrong, and the district court may be wrong. I am not proposing to try to reargue the case here, if you please. But I do want to try to persuade this committee that we have done our level best to try to interpret the law as we see it.

I am quite ready to admit that we have made mistakes here and there. We have denied benefits, and the Supreme Court has told us we are wrong in some cases. Then, in other instances, we have taken the opposite position, and the courts have told us we are wrong there, too. I do not think our average, though, has been too bad.

The CHAIRMAN. What you mean is that your record has been good when you tried to follow the intent of Congress.

Mr. WILLCOX. We have tried to do that, and I think our batting average in the courts has not been too bad.

The CHAIRMAN. By and large, you are right, but like other bureaus, you are reaching out for more and more income and power.

Mr. WILLCOX. I do not think that is a fair generalization, sir. The CHAIRMAN. I have been here since you were born, and it is clear to me that the tendency is to get more and more employees, because the more employees you have, the higher the salaries and the bigger your appropriations. That is what we have to fight all the time. We are fighting it now, every day.