Committee on Economic Security (CES)

Volume VI. Social Insurance

K. Miscellaneous Studies


APRIL 10, 1935

1. The recommendation that the various sections of the Social Security Bill be enacted as individual and separate measures requires little if any comment. This is unthinkable at this stage, and certainly the events in this session of Congress have demonstrated amply the wisdom of the Committee on Economic Security in proposing a single unified measure, instead of a series of measures.

2. The recommendation of the Advisory Council that the provisions of the Federal Act concerning unemployment compensation provide grants-in-aid to the States for payment of unemployment benefits, instead of using the tax credit device was investigated and debated at great length by the staff of the Committee on Economic Security, the Advisory Council, and the Committee on Economic Security itself. Those who advocated the grant-in-aid type of legislation wished to see a greater amount of Federal control than could be provided under the tax credit device. There are many considerations pro and con on these two types of measures, but the most significant fact is that Congress has been unwilling to retain in the Social Security Bill some of the most important provisions for Federal supervision and Federal standards recommended by the Committee on Economic Security. Judging by the action of the House of Representatives on the Social Security Bill, we can see that the long fight on the grants-in-aid type of legislation versus the tax credit type was largely wasted effort. It is quite out of the question to get national legislation with strict national supervision, standards, and control such as is desired by the advocates of the grants-in-aid type of legislation.

3. The Advisory Council urged a tax upon employees in the national law. This problem has also been thoroughly debated and weighed very carefully by the various committees, technical groups, and the Committee on Economic Security. The various considerations which led to the recommendation of making the Federal tax exclusively upon employers need not be detailed here, but it is sufficient to point out one significant fact. The Committee on Economic Security anticipated that States would provide various types of unemployment compensation, including guaranteed employment and individual employer reserve type of law. In these two types of unemployment compensation, certainly there is no logical defense which can be made for employee contributions. The Federal law as originally recommended was designed to fit these types of unemployment compensation systems as well as a general pooled State fund, and accordingly provided for employer contributions only. States may, if they wish, require contributions from employees if the system which they adopt makes such contribution appropriate. There is no interstate competition factor involved in employee contributions. If a Federal tax were levied upon employees, it would virtually preclude the establishment of certain types of unemployment compensation plans by the States.

4. The problem of differential rates can be taken care of later after there is experience and something to go on. Its absence in the Social Security Bill as it stands before Congress does not mean that differential rates in the future are precluded.

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