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Form F. R. 131 BOARD OF GOVERN•RS FEDERAL RESERVE SYSTEM O f f i c e C o r r e s p o n d e n c e To Chairman Ecoles Frnm Martin Krost 0 Date October 5 , 1 9 1 * Subject; Changes i n Social Security Coverage I have received the following information through Kr. Curried o f f i c e f o r your confidential use. The Social Security Board i s making the following recommendat i o n s . I t i s not clear whether these recommendations have been accepted by the President and by the Treasury. The Board i s recommending extension of coverage under the Old Age Insurance System to agricultural laborers, domestic servants, employees of non-profit organizations, farm operators and other self-employed persons and government employees. The Board i s recommending extension of coverage under unemployment insurance to employees of establishments having less than eight workers not covered under the present system. The Board estimates that the extension i n coverage and an i n crease i n the tax rate f o r old-age insurance from 2 to i+ V e r cent would raise the yield of this tax from the present annual rate of about |800 million to about $2 b i l l i o n . The Board proposes to raise the present 3 per cent tax f o r employment insurance to J+ per cent and to nationalize the system which i s now administered by the State governments with different scales o f employment benefits prevailing in each State. They estimate that these changes would raise the y i e l d of this tax from i t s present level of about #900 million to f l , 6 0 0 million. The change-over to a f u l l y federalized basis w i l l require some time and i t w i l l not be possible t o make this change f u l l y e f f e c t i v e before 191+3• The Board also proposes to set up a system of d i s a b i l i t y and hospitalization benefits and to levy a special 2 per cent tax for this purpose yielding about |800 million a year. The combined e f f e c t of these proposals would be an increase from the collections of $1,700 million in 19l|2 that would be made i f the system were l e f t unchanged t o $3*700 m i l l i o n . In 19^+3 collections would increase to $l+,i+00 million. The old-age taxes are levied one-half upon employers and onehalf upon employees. The unemployment taxes are levied wholly upon employers. I t i s generally believed that except in special situations the employers1 part of the tax i s passed on to the consuming public in the form of higher prices or back to employees in the form of lower wages than would be paid i n the absence of the tax.