On May 13, 1952, representatives of the association appeared before your committee in general support of H. R. 4371 and H. R. 4373, 82d Congress. At that time, we suggested various amendments to those bills. H. R. 9 and H. R. 10 now before your committee include all of the basic amendments recommended by the association in 1952 On August 12, 1953, representatives of the association again appeared before the committee in support of H. R. 10 and H. R. 11, 83d Congress. It is the belief of the American Medical Association that physicians, dentists, veterinarians, lawyers, farmers, small-business men and the many others who comprise the Nation's self-employed have long been neglected in Federal tax legislation relating to pensions. Under the existing law, corporations are entitled to set aside tax-free money to purchase pensions and annuities for their employees, and millions of employees are benefiting from that arrangement. Yet the self-employed are denied this tax advantage in providing for their old age. The purpose of these bills is to eliminate this discrimination and inequity. By extending the tax deferment privilege to the country's 10 million self-employed, this legislation will give them an increased incentive during their best earning years to save for their old age. Unless something is done to make self-employment as financially attractive as the employee relationship, we believe there is a grave danger that many professional men will bypass the private practice of their profession. The trend today is definitely toward becoming an employed person. This situation also contributes to a maldistribution of physicians since it makes the large city more attractive to the young professional man by providing more opportunities for him to become employed. On the basis of our observations over many years, we are convinced that this is one of the factors contributing to the pronounced migration of professional people into urban areas. So, quite apart from the objective of obtaining tax equality with our employed counterparts, we urge you to approve legislation of this type, because it is in the public interest. This legislation will be of particular benefit to physicians and other professional men who go through a long and costly period of trainnig, and whose earnings are bunched into a comparatively few years when they are subject to high income tax rates. Under the program proposed in the pending bills, the amount of each person's pension would be determined by his own contributions, without one cent being added by the Government. In addition, the program would not force an individual into idle retirement in order to draw upon his pension fund. Most important, it presents an opportunity for all who can provide for their own retirement to do so without undue discrimination against those who work for themselves. These comments indicate very briefly the general viewpoint of the American Medical Association toward this legislation. Because it removes a discriminatory factor which now discourages the private practice of medicine and other professions, it is in the public interest. Because it relieves an existing inequality, it should commend itself to you. Our association is glad to join the other great national organizations of the self-employed in urging that your committee act favorably on these bills. Sincerely yours, F. J. L. BLASINGAME, M. D. Hon. WILBUR D. MILLS, CONFERENCE OF ACTUARIES IN PUBLIC PRACTICE, Chairman, Committee on Ways and Means, DEAR CONGRESSMAN MILLS: The Conference of Actuaries in Public Practices, a nationwide association of consulting actuaries, is on record as favoring the passage of the Jenkins-Keogh bill (H. R. 9 and H. R. 10). At the annual meeting of the conference held in October 1957 the enclosed resolution with reference to this bill was unanimously adopted. A copy of the resolution is enclosed for your consideration, and we urge that the Committee on Ways and Means give a favorable recommendation to this bill at this session of Congress. Very truly yours, EDWARD D. BROWN, Jr., Secretary. RESOLUTION Whereas the members of the Conference of Actuaries in Public Practice provide actuarial guidance to the managers of pension plans covering more than 10 million employees in the United States, and employer contributions in the aggregate are at least 6 times the amount of the contributions by employees; and Whereas most of the members are self-employed persons; and Whereas the Jenkins-Keogh bills (H. R. 9 and H. R. 10) are intended to provide pension tax equality for the self-employed; and Whereas the members are familiar with the new pension legislation in the United Kingdom and in Canada for the self-employed; and Whereas the new law of the United Kingdom and the Jenkins-Keogh bills provide higher limits for older self-employed persons who are closer to retirement and the new Canadian law is slanted in the direction of averaging peak years of income as well as providing encouragement to save for old age; and Whereas the new laws in the United Kingdom and Canada and the JenkinsKeogh bills specify an annual limit of 10 percent of earned income but differ on the maximum number of pounds or dollars which can be set aside each year; and Whereas it is difficult to develop a meaningful common denominator for the pound and dollar limits with respect to the present state of employer-employee pension plans in the 3 countries and average level of earnings in the 3 countries: Now be it Resolved, That the Conference of Actuaries in Public Practice hereby urges the Committee on Ways and Means of the House of Representatives to approve the 10 percent of earned income limit now provided in the Jenkins-Keogh bills; and be it further Resolved, That the Ways and Means Committee be urged to develop a more equitable dollar limit which is more in keeping with the prevailing relationships between employer's contributions, the amount of the employee's compensation and the amount of the employee's benefits in pension plans approved under section 401 and related sections of the Internal Revenue Code; and be it further Resolved, That the Ways and Means Committee be urged to provide higher limits for older self-employed persons who are close to retirement at the date of enactment of this legislation and who would otherwise be unable to accumulate a sum sufficient to provide an adequate income after retirement. MEMORANDUM IN SUPPORT OF H. R. 9 AND H. R. 10, SUBMITTED ON BEHALF OF THE NEW YORK STOCK EXCHANGE BY G. KEITH FUNSTON, PRESIDENT The New York Stock Exchange, as it has for a number of years, wishes to support H. R. 9 and H. R. 10, which are designed to enable self-employed persons to save a portion of their income each year for their retirement on a basis of equality with those persons who are employees of concerns which have established pension plans. This bill would aid small-business men, farmers, and professional men, totaling more than 10 million self-employed persons. The members of the New York Stock Exchange are one of the smaller groups that would be affected by this legislation. However, their problem is typical of that of the small-business mau in a service industry.. More than 95 percent of our member brokers still do business as individuals or as members of partnerships. Although a stock-exchange firm can set up a pension plan for its employees, the partners themselves are excluded from participating in the plan. Certainly, the same reasons that impelled Congress to permit corporations to deduct as a business expense payments into a properly constituted employees' pension plan apply with equal force in permitting the self-employed to make similar deductions of funds properly segregated to provide retirement benefits. The proposed legislation is justified not only on the basis of equality but also as giving incentive to the self-reliant individual business and professional man to provide for his own future security. We believe that it is time for Congress to provide those who work for themselves with tax equality with those who work for others. Respectfully submitted. G. KEITH FUNSTON, Presideni, New York Stock Exchange. RESOLUTION ADOPTED BY THE NEVADA STATE MEDICAL ASSOCIATION IN ANNUAL SESSION, SEPTEMBER 25-28, 1957, LAS VEGAS, NEV., ENDORSING THE JENKINSKEOGH BILLS (H. R. 9 AND H. R. 10, 85TH CONG.) Whereas the present Internal Revenue Code of the United States discriminates against the self-employed in the matter of pensions and retirement; and Whereas the members of the Nevada State Medical Association are selfemployed, and feel that they are entitled as Americans to the same tax advantages as employees; and Whereas the Jenkins-Keogh bills (H. R. 9 and H. R. 10, 85th Cong.) would minimize the present inequities of the Internal Revenue Code between selfemployed persons and employees: Now, therefore, be it Resolved, That the Nevada State Medical Association, at its annual convention held in Las Vegas, Nev., after discussion of the Jenkins-Keogh bills, endorses the Jenkins-Keogh bills and requests the Congress of the United States to enact them; and be it further Resolved, That a copy of this resolution, duly certified by the secretary of the Nevada State Medical Association, be forwarded to the congressional delegation of the State of Nevada, to the members of the Ways and Means Committee of the Congress of the United States, and to the Speaker of the House of Representa. tives of the United States, the Honorable Sam Rayburn. [SEAL] WILLIAM A. O'BRIEN, M. D., Secretary. Hon. WILBUR D. MILLS, ILLINOIS STATE BAR ASSOCIATION, Chairman, Ways and Means Committee, House of Representatives, Washington, D. C. DEAR MR. MILLS: This letter is to present the position of the Illinois State Bar Association concerning H. R. 9 and H. R. 10, 85th Congress, which are currently being considered by your committee. We request that this letter and attachments be made a part of the printed hearings of these bills. At the outset, I wish to state that the Illinois State Bar Association actively endorsed the above-mentioned bills and earnestly requests that your committee consider and report them favorably. In order to indicate the extent of our interest, I will review, briefly, the official actions of our association with respect to this legislation. During the month of October 1956 the question of individual retirement legislation was discussed at each of the annual meetings of the Federation of Local Bar Associations in the seven supreme judicial districts in Illinois. At these meetings, resolution (copy enclosed) urging the enactment of this type of legislation was adopted. During the following month the board of governors of the State association appointed a special committee to prepare a form of constitutional petition to the Congress urging the enactment of bills such as H. R. 9 and H. R. 10 during the 85th Congress. A petition such as the attached was sent to each local bar association in the State of Illinois and to each bar association represented in the national conference of bar presidents. Petitions containing the signatures of over 2,500 self-employed persons were thereafter presented to your committee by the Illinois State Bar Association through the American Thrift Assembly. More recently, in May and November of 1957, the board of governors of the association again endorsed and supported the subject legislation. The resolution adopted in November directed the appointment of a representative to appear at hearings on the bills to testify on behalf of our association. In compliance with the wishes of your committee, however, and in order to conserve your time, this letter is being submitted in lieu of a personal appearance. The legal profession in the State of Illinois is on record as preferring a mechanism which will encourage the establishment of voluntary pension plans in preference to a compulsory, federally controlled system of social insurance. Our members are also keenly aware of and concerned about the serious inequities which exist under present Federal tax laws between lawyers, as self-employed persons and those persons who are employed by others. Under the existing law, employers may purchase pensions and other annuities for employees and treat the cost as a business expense. Under this arrangement an employee pays no income tax on such retirement contributions made on his behalf by his employer and he is thus able to defer tax payments on this part of his income until his retirement, when because of a smaller income he may pay little or no tax. The self-employed lawyer, however, enjoys no such advantage but instead has the disadvantage during his years of greatest earnings of paying the highest income-tax rate on all the money which he is able to set aside for his old age and retirement Professional practitioners practicing independently or as members of a partnership may establish a qualified pension or profit sharing plan for their employees (assistants, clerks, secretaries, technicians, etc.). However, as employers they are themselves ineligible to participate in these tax sheltered plans. Sole proprietors and members of partnerships in nonprofessional occupations can readily change their status by incorporating and obtaining the status of employees. Even though they may be controlling shareholders or corporate officers, they can participate in qualified pension or profit sharing retirement plans along with other employees. In their search for equal tax treatment and in order to acquire status as "employees," some physicians who previously practiced in medical partnerships have organized themselves into "unincorporated associations," and as such are taxable as corporations. In U. S. v. Kintner (107 F. Supp. 976), a group of physicians who were partners organized themselves in this way to secure the benefits of a preferred pension plan. The Ninth Circuit Court of Appeals held that these physicians could be considered as employees under section 401 (a) for the purposes of an employees' pension plan. Although, in Revenue Ruling 56-23, C. B. 1956-1, 598, the Internal Revenue Service originally refused to follow the Kintner decision, the Service has now acquiesced (T. I. R.-61) where it is apparent that a particular organization of doctors or other professional groups has more of the criteria of a corporation than a partnership. The Kintner case and the current position of the Internal Revenue Service, in permitting partners to obtain tax deferment of amounts contributed to a retirement pension plan by reorganizing as an unincorporated association, certainly emphasizes the inequity in the present tax laws with respect to self-employed persons. It is the belief of our association that H. R. 9 and H. R. 10 would tend to equalize this unfair situation by allowing lawyers and other self-employed persons to put aside proportionate sums for retirement purposes up to $5,000 of their income each year with the income-tax payments deferred until retirement payments are paid. It is our opinion that it is in the best interest of this country for the Congress to eliminate existing inequities of this type. We are also convinced that the enactment of the Jenkins-Keogh bills would lessen inflationary pressures through the encouragement of increased savings. In conclusion Mr. Chairman, on behalf of the Illinois State Bar Association and the attorneys of the State of Illinois, I would like to express appreciation for the opportunity to present our views on this extremely important legislation. We urge you to favorably report the pending bills, or comparable legislation, early enough during the 85th Congress to permit action by the Senate. Sincerely yours, B. F. SEARS. RESOLUTION OF ILLINOIS STATE BAR ASSOCIATION Resolved by the Board of Governors of the Illinois State Bar Association, That this association urge enactment into law by the 85th Congress of bills containing the substance and principles of the so-called Jenkins-Keogh bills, being H. R. 9 and H. R. 10, in the 85th Congress, which have been actively supported by this association in several preceding sessions upon direct and repeated request of a large majority of its membership: further Resolved, That the president is directed to appoint a representative or representatives of this association who are hereby authorized to appear and testify in support of such legislation at any hearings pertaining thereto by the House Ways and Means Committee or any subcommittee thereof in this or any subsequent Congress; further Resolved, That this association, its officers, its committee charged with matters relating thereto, and its said representatives, do all things necessary, desirable and proper to obtain enactment of such legislation. THE CHICAGO BAR ASSOCIATION, Chicago, Ill., January 22, 1958. Hon. WILBUR D. MILLS, Chairman, Committee on Ways and Means, House of Representatives, Washington, D. C. MY DEAR MR. MILLS: The Chicago Bar Association favors enactment of legislation embodying the principles and purposes of the Jenkins-Keogh bills H. R. 9 and H. R. 10. We believe that the equitable adjustment of the income-tax laws which would be effected by the Jenkins-Keogh bills is vitally important to our national economy because it furnishes a means through which self-employed persons can provide for themselves upon retirement rather than look to the Federal Government for support. I understand that the arguments in favor of these bills will be presented to the Ways and Means Committee on Friday of this week. Repetition of these arguments herein is therefore unnecessary. The Chicago Bar Association concurs in the conclusion that legislation providing for a method of deferment of income for self-employed persons, as contemplated by the Jenkins-Keogh bills, be enacted in this session, and we respectfully urge your favorable consideration. Sincerely, E. DOUGLAS SCHWANTES, President. CHAMBER OF COMMERCE OF THE UNITED States, Hon. WILBUR D. MILLS, New House Office Building, Washington, D. C. DEAR MR. MILLS: The Chamber of Commerce of the United States strongly supports the general principle of encouraging individuals to build retirement income-old-age protection-through their own efforts. We believe that this encouragement is a natural complement to the congressional intent for social security. That is, social security is to provide a floor of protection on which each individual is expected to build more old-age income protection through his own efforts. We favor the idea of offering this encouragement through the postponement of taxes on income set aside for this purpose. Such encouragement should extend to both employees and the self-employed. While employees covered by industrial-type pensions stand to benefit to the extent that employers make a contribution, a substantial number of them will receive only small monthly payments. We believe these workers should be encouraged to make additional provision for old age. We therefore support H. R. 380 which extends this encouragement to employees and the self-employed. For the same reasons, we do not support H. R. 9 and H. R. 10, which restrict this inducement to the self-employed. We also believe a difference in treatment would be appropriate for workers covered by contributory or noncontributory plans on the one hand, and all other workers and the self-employed on the other. This is because many workers as employees stand to benefit to the extent that employers make a pension contribution. Consequently, we support the approach dealing with this aspect embodied in H. R. 380. Some 45 to 50 million workers have no protection from pensions financed in part or in whole by employer contributions, and many of the remaining 18 to 20 million workers will receive relatively small pensions from this source. Consequently, we believe that this encouragement to individuals to build retirement income through their own efforts should be provided. Since this would entail some loss of Federal revenue, attention, of course, would have to be given to adjusting the annual amount and aggregate amount with respect to which individuals would be allowed a postponement of taxes. We believe the widest possible freedom should be allowed in the choice of methods for providing old-age income. Sufficient restraint should be imposed to prevent individual short-run tax gains and to allow for efficient administration of this tax postponement feature. Any law should be flexible enough to enable any individual to employ traditional methods of providing for old age, and any that might be subsequently developed. |