the whole Nation is responsible. Yet there can be little doubt that industry itself is the best qualified to carry out the retraining job. It knows its own needs, has the essential know-how, and has many of the facilities needed. Once again, this combination of circumstances points clearly to the solution-a liberal tax credit to industry for worker retraining. Using the tax credit as a stimulant places the financial burden for retraining where it fairly belongs-on the entire Nation. The credit also has the virtue of allowing industry to do the retraining itself. Thus it is twice blessed, by equity and by efficiency.

"There is ample precedent for use of the tax system to bring about desirable economic and social conditions. Hardly any individual deduction or credit is enacted without economic or social objectives. But the most compelling precedent for the retraining credit is the 7-percent credit for investment in new equipment enacted in 1962. This credit was enacted largely because American plants were not being modernized quickly enough to meet vigorous foreign competition. The credit is designed to reduce tax by 7 percent of the amount invested in qualified machinery, thereby increasing industry's incentive to modernize. It could hardly be argued that a similar credit to reduce unemployment is less desirable. On the contrary, there are powerful economic and social reasons for a retraining credit. From the economic point of view, increased employment will bring greater purchasing power and increased gross national product. It will also reduce the need for unemployment compensation as well as public and private payments to support the indigent and their dependents. While initially producing some tax revenue loss, the longer term stimulative effects would ultimately increase Treasury receipts. Moreover, placing displaced workers back on the payroll will make them taxpaying citizens again, thus preserving a revenue source which might otherwise be lost forever. From the social point of view the benefits are ample. As obsolete skills are replaced with productive skills the widespread indignity of joblessness would be reduced. Racial tensions will be eased. Poverty will be reduced and with it the delinquency and squalor which fester in our slums. And from a moral point of view it is apparent that we could not be true to our humanitarian ideals if we did not try to improve obsolete workers as much or more than obsolete machines.

"Whether the credit would be an effective device to induce management to undertake dynamic retraining programs would depend on numerous factors. The size of the credit would be critical. Without suggesting any figure it is clear that it would have to be substantial. It might be argued that a credit will not induce a company to do something it didn't intend to do in any event. But this same argument could have been advanced against the investment credit. Experience with the investment credit seems to have been favorable; while not conclusive it is noteworthy that investment in new machinery has advanced significantly since the credit became available. Perhaps the answer to the incentive question is that the credit acts as a nudge to the undecided. If it is not a sufficient inducement in itself further inducements can be considered. For example, to encourage the retention of workers where displacement is imminent or after displacement and retraining, an additional deduction for wages could be temporarily permitted for certain workers. Canada's new tax incentive program allowing a deduction of 150 percent of increased research expenditures has spurred research and development in that country. A similar transitional spur to employment in the United States may be warranted. While business spends to make money, not to save taxes, the enactment of a temporary tax differential favoring labor over machines may keep the advance of automation at a more orderly pace by allowing more after-tax profits to be made by employing certain displaced workers rather than machines.

"Widespread agreement on the need for full employment can be assumed. However, the community of views rapidly vanishes when the techniques for achieving this desirable state are explored. The diversity of views is primarily based on different economic philosophies, most generally reflecting differing economic affiliations. Granted the pressing danger of increasing structural unemployment, a solution which does the least violence to the main armed campslaissez faire versus planned economy-has, as a practical political matter, the greatest promise of becoming reality.

"Employing a tax credit to encourage worker retraining and retention has some remarkable practical political attractions. For those who believe the best government is the government which governs least, it has the attribute of getting Washington out of the retraining business by putting the job in the hands of industry. There is respectable opinion that industry can do both a better and more efficient job than government. On the other hand, those who favor in

creased Federal economic planning may derive a large measure of satisfaction from witnessing the Federal tax system actively used to create fuller employment. Moving from the battle of philosophies to the war of pressure groups the prospect is also bright; industry generally cannot be expected to chafe at a tax reduction which increases profits and labor would doubtless hesitate to bewail a measure calculated to increase employment.

"Of course, objections to the proposal will be raised. At the congressional hearings on the investment tax credit numerous reasoned and not-so-well-reasoned complaints were made. Among the latter group the standard lament over government incursions into the realm of business was heard. Of course, the power to tax is the power to destroy. But the converse of this antique truism is also true; the power to tax is the power to create. Creation or destruction depends not upon the tool but the use to which it is put. This fact cannot be hidden by slogans and thus it may be expected that a preponderance of power group opinion would favor the measure. Moreover, the reaction of the general public also should be favorable; a sense of fairplay and justice would certainly require at least as favorable treatment for investment in human assets as the treatment accorded to investment in machines.

"Perhaps the most ambitious action taken so far to combat unemployment is the Manpower Development and Training Act which provides Federal funds to States for retraining. It has been a disappointment. Very few States have passed enabling legislation and the necessity for States to match Federal funds in the future does not augur well for the program in view of the pressing financial problems of most States. A tax credit is a more efficient device for getting the job done. It will cost the Nation less because industry will use its own existing facilities eliminating the need for expensive expansion of State facilities. Administration of the program will also be greatly simplified; instead of creating a large agency in Washington to establish and supervise training standards the job will be done by business itself under the observant eye of an existing corps of revenue agents.

"Other measures have been urged to aid in alleviation of the problem, but the suggested cures seem as bad as the disease. A shorter workweek has been suggested, but roundly criticized as tantamount to an inflationary wage increase making it harder for American goods to compete in domestic and world markets. Massive public works programs, increased Government employment, lower interest rates, and various other proposals have been made. Like the shorter workweek, each of these proposals involves serious drawbacks. While these broad measures may initially promote employment, they do long-range economic damage in other areas. On the other hand, use of our tax system to combat structural unemployment provides a highly specific approach which can be solely addressed to the automation-unemployment problem without other adverse long-range effects. The rifle versus shotgun analogy is apt here the credit remedy targets directly on the problem; other remedies scatter undesirable side effects. The ability of the tax credit to focus on a single problem is one of its unique features as an economic planning device.

"Of course, the enactment of this proposal would be only a partial solution. The basic need is more jobs. The existence of more job opportunities depends to a large extent on greater demand for the goods our economy produces, particularly goods with a high labor content. The pending tax bill providing for across-the-board tax cuts is a move in the right direction, but its emphasis is wrong. The value of the tax cut would be greatly increased if more of the tax reduction were provided for lower income taxpayers, who would spend the additional income, rather than to higher income taxpayers, who would be more likely to save or invest it. Our national need at this juncture is for more consumption; with existing overcapacity there seems little justification to stimulate investment. But even a tax cut for low-income groups is also only a partial solution. As the true proportions of the automation problem become visible it is becoming apparent that attack on many fronts is essential, requiring the joint strength of industry, labor, and Government. The tax credit is only one of many ideas which must be explored.

"In view of the nationwide scope and urgency of the unemployment problem, it is reasonable to expect that the excess costs of employing certain workers should be borne by society in general. Certainly any tax credit remedy can be criticized. But unless the threat of automation is overcome, political pressure may build to impair or destroy the advance of technology, and with it some of man's best hopes for abundance and betterment. In the absence of effective countermeasures there is danger that labor unions eventually will be forced to

sponsor featherbedding as a nationwide industrial institution. Or, perhaps worse. grave unemployment may build sentiment to compel the Government to institute massive aid comparable to the farm program. These dismal alternatives should be avoid-and they can be by vigorous action now. Automation is neither a blessing nor a curse. It is merely another economic fact of life which we, with good sense and ingenuity, can shape to serve our general welfare.

"CONCLUSION

"Any proposal of this type requires careful study to assay its validity. Perhaps the most critical areas for investigation are administrative difficulties, whether the credit would, in fact, induce industry to retrain and reemploy, how much incentive is needed, and what effect it would have on industrial efficiency. Study should also be directed at determining how much unemployment results from workers' geographical immobility. If this is an important factor, consideration should be given to extending the credit to worker relocation costs Investigating these problems requires extensive research. In view of the great potential benefits we should get on with the task."

RECHANNELING TRAINING THROUGH AMERICAN BUSINESS

Mr. SKUBITZ. Mr. Speaker, I have been concerned that the growing number of Government manpower programs-many of them admittedly worthwhilehave nonetheless had a depressing effect on the magnitude of private business' investment in the skills of the Nation's labor force through job training programs of its own.

Last April, Mr. Nat Weinberg of the United Auto Workers testified before the Joint Senate-House Manpower Subcommittee. He told the subcommittee:

"We face practical situations; we have one in the Chrysler Corp., where, under present conditions, the Chrysler Corp., instead of undertaking the retraining of workers that it would normally do on its own, is trying to transfer that burden to the Government manpower programs just because they are there. Chrysler is making enough profits to do it, it needs these workers, it would do it if the manpower programs were not there.'

I cannot personally vouch for the accuracy of Mr. Weinberg's statement, of course, but if it is true we are now beginning to see a very unhealthy phenomenon: tried and true private business training programs abandoned in favor of Government-operated programs paid for not by private firms but by the ordinary taxpayer

The Human Investment Act will do much to nip any such disturbing trend in the bud, Mr. Speaker, because it helps to shift the major responsibility for retraining back where it belongs-on the American free enterprise system. I am happy to join in sponsoring this legislation, and hope that Congress will give it prompt and favorable consideration.

Mr. ANDERSON of Illinois. Mr. Speaker, I am pleased to associate myself with the efforts that have been announced here on the floor of the House today to provide an incentive to American business to invest in the improvement of the Nation's human resources by hiring, training, and employing presently unemployed workers lacking needed job skills, and by upgrading the job skills of and providing new job opportunities for workers presently employed. I have joined in cosponsoring the Human Investment Act. It would provide

for a 7-percent tax credit to an employer toward certain of his employee training expenses. Among the expenses specifically named are those relating to ap prenticeship training, on-the-job training under the Manpower Development and Training Act, cooperative work-study programs, and tuition refund and organized group instruction payments by employers.

Just as the 7-percent Investment Credit Act contributed to the economic expansion in the private sector of our Nation's economy, this 7-percent tax credit which we propose in our Human Investment Act will give important recognition to the fact that America's greatest natural resource is "human capital." Our proposal will provide an impetus to the efforts that are being made to try and close the gap between the technological and manpower needs of the Nation. Indeed, what we propose would go a long way to encourage private business, both large and small, to invest in upgrading the job skills of the Nation's labor force. It would also place the responsibility for increased job training where it belongs; namely, on the Nation's greatest job trainer-our private enterprise system.

Certainly with the enactment of such a proposal, I think we can foresee such benefits as advancement of individuals to better jobs through more training.

Also, those now unemployed because of inadequate skills could be hired to take their place. The Human Investment Act offers new hope, too, to workers whose jobs are threatened by automation or by economic dislocations.

Mr. Speaker, because this bill would use the tax credit approach, it would result in a temporary loss of general revenues to the Federal Government but this loss would be diminished as a result of the increased earning capacity of the individual and greater economic growth. Rather than see a lot of spending of dubious value by the Federal Government, I would prefer to see such a meritorious program of tax credits enacted into law. Authoritative sources predict that the gross national product of the United States would advance to $870 billion by 1970. If those predictions materialize, then such a gross national product would mean Federal revenues of some $165 billion with tax rates at their present levels. This is about $50 billion above that for fiscal year 1965, just ended.

In conclusion, I want to urge my colleagues on the Committee on Ways and Means to give early and favorable consideration to a proposal as meritorious as this, which can reasonably be expected to play such a vital role in spurring our Nation's economy on to new heights.

CONCLUSION

Mr. CURTIS. Mr. Speaker, I wish to conclude this special presentation by thanking the 43 Republican Members of the House who have joined me in introducing this legislation, and especially the 35 Members who have contributed so much to the success of this presentation with their remarks today.

On behalf of all the House sponsors, I also wish to express my appreciation for the very helpful cooperation many of us have received from Republican Senator Winston L. Prouty, of Vermont, who conceived legislation to apply the tax credit principle toward the expenses of job training by private industry.

Mr. Speaker, I have rarely seen so much instantaneous enthusiasm among my colleagues for a new concept in legislation as that which has attended the Human Investment Act. This measure is an important initiative toward finding new solutions to one of the most critical problems. I commend it to Members of Congress, and sincerely hope that the appropriate committees invest a good deal of time and interest in evaluating what I believe to be its very great potentialities.

ITEM 6

BACKGROUND AND SUMMARY THE HUMAN INVESTMENT ACT

(S. 2509, H.R. 10934, 89th Cong.)

PURPOSE

To provide an incentive to American business to invest in the improvement of the Nation's human resources by hiring, training, and employing presently unemployed workers lacking needed job skills, and by upgrading the job skills of and providing new job opportunities for workers presently employed.

METHOD

The act offers employers a tax credit toward certain expenses of programs designed to train prospective employees for jobs with the company or retrain current employees for more demanding jobs with the company.

AMOUNT OF TAX CREDIT

Sevent percent of the allowable training expenses, with a maximum of $25,000 plus 25 percent of the taxpayer's tax liability in excess of $25,000. This credit would be in addition to credits provided for by other sections of the tax code, and in addition to the regular deduction as a trade or business expense under section 162 of the code.

ALLOWABLE EMPLOYEE TRAINING EXPENSES

1. The wages and salaries of employees who are apprentices in an apprenticeship program registered with a State apprenticeship agency or the Federal Bureau of Apprenticeship and Training.

2. The wages and salaries of employees who are enrolled in an on-the-job training program pursuant to section 204 of the Manpower Development and Training Act of 1962.

3. The wages and salaries of employees who are participating in a cooperative eduation program involving alternative periods of academic study and employment in cooperation with a secondary school, college, university, business school, trade school, or vocational school.

4. Tuition and course fees paid by the taxpayer to a college, business school, trade school, or vocational school for instruction of any individual in job skills necessary for his employment by the taxpayer or for his continued employment with the taxpayer.

5. Home study course fees paid by the taxpayer to any college, university, or accredited home study school for instruction of any individual in job skills necessary for his employment by the taxpayer or for his continued employment with the taxpayer.

6. Expenses to the taxpayer of organized group instruction (including classroom instruction), including expenses for the purchase or lease of books, testing and training materials, classroom equipment, and instructors' fees and salaries, incurred in training any individual in job skills necessary for his employment by the taxpayer or for his continued employment with the taxpayer.

OTHER PROVISIONS

1. Allowable employee training expenses must be tax deductible under section 162 of the code, relating to trade or business expenses.

2. To claim credit toward the expenses of training a given individual, that individual must remain on the payroll for at least 3 months after completion of the training. A taxpayer could claim credit toward tuition and group instruction expenses of individuals not employees, provided that at the completion of training the taxpayer puts the trainees on his payroll for at least 3 months. Exceptions are made for death, disability, voluntary separation, and firing for cause. 3. The tax credit could be carried back 3 years and carried forward 5 years. 4. No credit would be allowed for the training of managerial, professional, or advanced scientific employees. The intent of the act is to encourage business to upgrade the skills of those at the bottom end of the skill and income ladder, not middle management or professional employees.

5. Employers could not claim a credit when the training expenses are reimbursable by the Government under a training contract, etc.

COMMENT

The Human Investment Act is patterned closely after the investment credit provisions of the Revenue Act of 1962, which permitted a 7-percent tax credit toward investment in certain depreciable plant equipment and real property. This bill is an attempt to meet the increasingly serious problems of structural unemployment caused by a labor force ill fitted for existing and developing job opportunities. Its intent is to advance workers up the skill ladder, thus opening vacancies at the bottom for the presently unskilled and unemployed. Its major premise is that private business has over the years learned how to obtain the most results per training dollar, and should now be encouraged to expand its training programs to meet this national need. Rather than to expand Governmentoperated training programs, with all their bureaucracy, inefficiency, and expense, the philosophy of this act is to revise the tax structure to stimulate increased investment in "human capital" by the private sector of the economy.

LEGISLATIVE HISTORY

The original version of the Human Investment Act was introduced on February 17, 1965, by Senator Winston L. Prouty, Republican, of Vermont (S. 1130, remarks at p. 2702, Congressional Record). Following 6 months of study and consultation with businessmen, labor leaders, economists, and tax lawyers, the revised Human Investment Act was introduced on September 9, 1965 (S. 2509, H.R. 10934). Detailed explanatory remarks by Senator Prouty appear at page 22506 of the Record of that day. A special presentation organized by the leading House sponsor, Representative Thomas B. Curtis, Republican, of Missouri, begins at page 22400. Thirty-five Representatives took part in the presentation and a total of 46 introduced the bill at that time.