NFIB/NY Testifies on the State Budget

2014 Legislative Public Hearing on 2014-15 Executive Budget Proposal – Taxes 

NFIB/NY State Director Michael Durant

February 10, 2014

Good morning. First, let me thank you Senator DeFrancisco and other members of this joint committee, for allowing me to be here on behalf of small business today.

My name is Mike Durant, and I am the New York State Director of the National Federation of Independent Business. NFIB represents 11,000 small businesses in every corner of the state. Our membership is comprised of sole proprietors to farmers, manufacturers and retailers.  The typical NFIB member has 5 or fewer employees and more than half of our members report gross sales of $350,000 or less.   It is on behalf of those members that I am here today.

The importance of small business to our state’s economy cannot be understated. Last year, there were more than a half million small businesses, employing almost four million workers, in New York State. In addition to being a major job creator, small businesses are vital to our communities and an essential component to our economic future.  Through countless examples of volunteerism and philanthropic endeavors it would be difficult for any New Yorker to state that their lives have not been positively impacted by main street businesses.

NFIB regularly canvasses its members on the issues that most concern them. It is not surprising that New York’s crushing tax burden remains top on the list.

We appreciate that Governor Cuomo first has recognized that New York’s future economic potential will be diminished significantly if our onerous tax structure is not drastically overhauled and second has proposed  action.  Too often, tax reform is strategic in nature and nibbles around the edges of major reform – Start Up NY, enacted last year is a recent example.  That said, this package of tax reform is, while not the slam dunk that has been purported by some, a better step forward with room to dramatically put cracks in New York’s cemented status as the tax capital of the nation. 

But only if this plan is broadened.

Let’s quickly run down the components we support and acknowledge that these elements were also proposed in our legislative agenda for 2014.

Starting with the accelerated phase out of the 18a assessment, consumers, including businesses, will see immediate savings in their energy costs.

Reducing the corporate tax rate will help strengthen the fiscal footing of businesses across the state while adding much-needed clarity and equity to the state’s code.

Also critically important, particularly to our family owned small businesses and farms, is the estate tax reform. Increasing the exclusion threshold and reducing the top tax rate will help ensure that many of our family owned businesses stay here in New York.

These are all proposals that NFIB supports and encourages enactment of in the final adopted budget.

Now for the other side of the coin.


It is our position that the tax reform proposed by the Governor is in fact an incomplete plan.  Incomplete because it largely leaves out the immediate relief that many true small businesses desperately need now. Tax cuts for corporations and manufacturers are necessary and laudable, but this proposal leaves out 75% of New York’s small business owners. There’s no tax relief for the many of the same group of small business owners that have seen their costs rise as a result of the minimum wage hike, a temporary increase in UI premiums, and state taxes on health insurance coverage for themselves and their employees.

The increased costs for small businesses aren’t balanced out by any tax relief . Start Up NY, if it succeeds,   will have minimal induced benefits for small business, the majority of our members would not even qualify for the business expansion mechanism of the program. So, where does that leave small business?  Searching for recognition from the Governor and Albany of their importance to our state’s economy.

It is critically important to note that the majority of small businesses pay their taxes through the personal income filings. The Governor’s budget proposal does not include any personal income tax reductions or targeted PIT reductions for small business. NFIB’s position is that a tax reform proposal should be broad in scope and impact. This plan, while as I have illustrated earlier is more broad, fails to offer any relief to a critical segment of the economy that frankly cannot continue to shoulder such a sizable piece of New York’s tax burden. We strongly urge amending this proposal to include a personal income tax reduction that would benefit both small businesses and New Yorker’s that need their costs reduced.  Another alternative would be to put in place a percent deduction on business earnings for personal income filers.  Either approach would fully capture the small business community.

Similarly, NFIB strongly opposes the “circuit breaker” methodology proposed in this fiscal plan. A circuit breaker will only shift the burden while avoiding addressing the structural reasons behind the large property tax burden. In relation to this position, we also opposed the two year “property tax freeze”.  We appreciate the Governor looking at New York’s property tax problem, but feel this method of tackling the problem is not a viable course of action. 

A circuit breaker is not true tax reform.  A temporary tax freeze is also not tax reform. They are simply avoiding the problem and shifting costs. Shifting the costs through a circuit breaker ignores the politically sensitive issues of mandate relief. NFIB was a strong supporter of the enacted property tax cap, and we maintain that the cap needs to be paired with significant mandate relief in order to address New York’s high property tax problem.

We agree with the Governor that property taxes are among the most onerous taxes for New Yorkers. We also appreciate his effort to cut those taxes. We do not, however, agree with his proposal in its entirety. New York will never be truly open for business if our schools and municipalities are in fiscal peril, largely due to state mandated costs.

Additionally, NFIB feels that the bulk of the tax cuts within this proposal are based upon future restrictive state fiscal plans.  We completely agree that the Governor and legislature has done a necessary and terrific job of reigning in state spending.  But relying on the adherence of limited spending increases in future budgets is a leap of faith that employers and taxpayers should not have to take.  NFIB would support and urge the final budget deal to include a 2% state spending cap.  This will help the continuation of rightsizing our state for the 21st century and guarantee these tax cuts will be fully implemented.

As I stated at the beginning of my testimony, NFIB applauds the Governor for focusing on tax relief and reform in his budget proposal. It is a solid foundation that has components which NFIB supports.

We urge the legislature to build on that foundation and will work with all sides of this debate to shape a brighter future for all New Yorkers, as his attempts to do.

Achieving that vision, however, will require the adoption of a broad and comprehensive tax relief plan which will include small business and return the focus on comprehensive mandate relief measures rather than cost shifts and avoiding the fiscal ills of our communities and schools.

Thank you.

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On Repeat: NYS Employer Annual Wage Notices Due February 1st

It’s that time of year again. New York State employers are required to give workers (both new hires and existing employees) a notice of wage rates by February 1st every year. The notice should be in English and the employee’s primary language, and employers must obtain acknowledgement of receipt from each employee. The acknowledgement of receipt must be kept on file for six years, and failure to comply with the requirement can result in a penalty of $50 per employee.

While some employers have payroll companies that include the notice with employees’ pay stubs, this annual notification requirement is on the long-list of regulatory hassles that many small business owners personally handle. The mandate has aggregate costs of millions of dollars annually in time, labor and administrative burden for business owners.

The required information of the annual pay notice includes:
-Rate of pay
-Overtime rate of pay
-Basis (hourly, weekly, salary, etc.)
-Allowances
-Employer name or DBA
-Employer address
-Mailing address (if different)
-Employer phone number

If you’re thinking that this information sounds exactly like the pay information that State Labor Law requires on each pay stub anyway, you’re correct. Including this information on every pay stub throughout the year protects workers’ rights by giving employees the opportunity to question or inquire about any pay that appears to be wrong. Plus, there’s a separate requirement that employers must provide a written explanation of how individual employee wages are calculated, if requested by the employee. The additional annual wage notice requirement therefore offers few benefits to employees but imposes significant costs on employers.

NFIB-NY has long supported legislation to repeal the annual notice requirement as a means of providing compliance relief to employers while still protecting workers’ rights. After NFIB-NY and other business groups called for a vote on the legislation in 2012, the New York State Senate passed the bill, but the Assembly failed to act.

The bill (S.2313/A.2482) is a key piece of NFIB-NY’s 2014 legislative agenda and will be a topic of discussion with lawmakers throughout the session, as well as a focus of Small Business Lobby Day on March 12, 2014. To register to attend Small Business Lobby Day, please contact Erin DeSantis at (518) 434-1262 or erin.desantis@nfib.org.

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Worker Misclassification: Increased Audits and Penalties in New York State

New York State employers should be vigilant about the proper classification of workers as employees or independent contractors on a go-forward basis. Although businesses already may be aware of the 2007 Questionable Employment Tax Practices (QETP) state-federal initiative to crackdown on illegal tax schemes, the New York State Attorney General and US Department of Labor recently entered into an agreement that puts more employers under intense scrutiny.

This memorandum of understanding, signed in November 2013, facilitates the exchange of information and coordinates state-federal enforcement efforts against businesses that misclassify workers.  In conjunction with this information sharing program, the chief of the IRS Employment Tax Policy Section also announced a ramped up QETP initiative that kicked off  with a growing number of worker-classification audits starting this month.

Aggressive enforcement of labor laws targets employers that intentionally misclassify workers as independent contractors in an effort to cut costs including avoiding paying minimum wage, overtime, unemployment insurance and workers compensation, Social Security and payroll taxes. But employers that mistakenly misclassify workers also face stiff penalties. Labor attorneys warn that employers charged with misclassifying workers can face federal and state criminal charges, civil penalties and tax liabilities.

Classification of workers as employees or independent contractors in many cases can be complicated because of state and federal statutes and policies. The complexity causes some law-abiding employers to mistakenly classify workers, and it puts other law-abiding employers at an unfair competitive disadvantage as a result of higher costs. NFIB-NY is working with the Governor’s Office and other state agencies to gain additional clarification and guidance for employers.

For more information about the distinction between independent contractors and employees, please visit:
NFIB’s Workforce Issues: Independent Contractors and Consultants
New York State Department of Labor
US Department of Labor Wage and Hour Division

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Employer Guides: NY’s Unemployment Insurance System

New York State recently made several changes to the Unemployment Insurance (UI) system as part of the Business Relief Act passed in the 2013-2014 State Budget. These changes will save employers approximately $400 million in total and will allow the State to pay off a $3.5 billion federal loan by 2016 instead of 2018.

The changes to the system that employers should be aware of include: (1) penalties for employers that are late in responding to the Department of Labor’s requests for information; (2) wage base and rate schedule changes; (3) strengthened anti-fraud measures and extra job search requirements; (4) employers accounts may not be charged for future claims if an employee is terminated for misconduct.

The following links provide detailed guidance and highlight the changes for employers:
Employer’s Guide to Unemployment Insurance, Wage Reporting, and Withholding Tax
Unemployment Benefits- Employer’s Guide
Questions and Answers: Hearings Before Unemployment Insurance Administrative Law Judges

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NFIB/NY Responds to Governor Cuomo’s Budget Proposal

“New York’s small business owners are encouraged that the Governor’s Executive Budget proposal continues to promote fiscal responsibility and incorporates components of our small business agenda.

“Governor Cuomo has rightfully focused on reducing New York’s sizable tax burden this year.  From reforming the estate tax to cutting costs for manufacturers, this fiscal plan has the potential to change both perception and reality for our state.

“We are, however, concerned that this tax relief component would bypass the broad majority of existing small businesses.  We also reject the circuit breaker concept for two reasons.  It redirects the conversation away from the comprehensive mandate relief that we need.  And it diverts state funds that could be used for broad based tax relief for small business. 

“We are pleased that the Governor continues to address the substantial regulatory hurdles that businesses face in this state and will work with the administration to help cut red tape to encourage sustainable economic growth.  We will analyze the Governor’s budget plan in greater depth over the next few days and continue our efforts to advocate and work with the Governor and lawmakers on behalf of taxpayers and small business owners.”

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The Top Four Things To Watch For in Healthcare This Year

Focus, determination, and attention to detail are among the entrepreneurial traits you depend on to keep your business on the path to success. It’s no easy task to maintain optimism in the face of today’s economic and political challenges, but your strength and leadership is again in great demand, particularly now, as key deadlines of President Obama’s Affordable Care Act approach. 

But as all true entrepreneurs know, moments of challenge also present opportunity. As 2014 unfolds, four of the leading Obamacare challenges to the survival of your business are on the near horizon. All afford opportunities for you to personally illustrate to your members of Congress the reform law’s numerous pain points that could inflict serious damage on your business. 

  1. First up is the penalty awaiting sole proprietors, aka the “individual mandate,” that kicks in March 31. Those who miss that deadline to buy what the law deems “minimum essential coverage”–which typically contains more health services than necessary–will be assessed a tax.
  2. Then on Tax Day, April 15, many higher-income small-business owners will feel the pain of a 3.8 percent investment tax. Officially deemed the Unearned Income Medicare Contribution Tax, this revenue raiser was added simply as a way to fund the Affordable Care Act.
  3. And sometime this spring, although not publicly announced, the Health and Human Services Department and health insurers are hoping to meet—behind closed doors—to negotiate new, and certainly higher, premium rates for 2015. This will be another great opportunity for you to alert your members of Congress that the voice of small business demands to be heard during this process.
  4. As the year begins to wind down, a fourth and equally important opportunity to share your concerns with lawmakers will come in November and December as even greater numbers of small businesses get hit with health insurance policy cancellations and higher premiums as well. 

Challenges? Yes, but also opportunities to show how Obamacare is impacting real people and real businesses like yours. Join NFIB and, together, we’ll take advantage of all these opportunities to continue to fight for a healthcare system that works for small business and not one that means less choices, dropped coverage and higher premiums.

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New Year, Important Changes for NY’s Small Businesses

 

As the the calendar flipped to 2014, many important changes went into effect.  Is your small business up to date?

Minimum Wage
On December 31, 2013, the minimum wage in New York State increased to $8.00. For most employees, overtime must be paid for any hours over 40 in a week at a rate of 1 ½ times the hourly rate. All employers must display a minimum wage poster in their workplace.

Unemployment Insurance
Important changes in Unemployment Insurance also went into effect on January 1, 2014. These changes include expanded work search requirements for claimants, an adjusted wage base for employer contribution rates, limits on dismissal/severance pay and increased earnings requirements in order for claimants to qualify or re-qualify for benefits.

Workers Compensation
January 1, 2014 also brought significant changes to the Workers Compensation system. Multiple assessments will now be combined into one bill and the Re-Opened Case Fund will be closed to new claims on January 1, 2014. These changes are expected to lower costs of assessments in 2014 by 25% and save all New York State employers over $300 million.

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NFIB Legal Explains What the Recess Appointment Case Means for Small Business

Great news from Washington – Virtually all of the commentary on today’s oral arguments in NLRB v. Noel Canning suggests that the Court is inclined to hold President Obama’s 2012 “recess appointments” to the National Labor Relations Board unconstitutional. ABC News reports that the Court is “skeptical” about the President’s arguments. And in an exclusive Federalist Society teleforum, John Elwood—Partner at Vinson & Elkins, LLP—summed the argument up saying: “The writing on the wall is in neon.”

We are cautiously optimistic here at NFIB Legal. But, there are several ways that the Court might choose interpret the Recess Appointment Clause—some of which would cabin the President’s appointment powers more than others. So, we will have to wait to see exactly how the court rules. But, at this juncture it sounds like we can expect a positive decision one way or the next. 

Of course, NFIB joined with other industry groups in filing an amicus in this case because we think it has profound implications for small business. For a simple break-down of what is at stake, and why it matters to mom-and-pop shops, check out Karen Harned’s op-ed in the Daily Caller today. 

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Great News for Small Business: NLRB’s Notice Poster Rule is Dead

In case you missed it, the NFIB Legal Center released a statement earlier this week proclaiming final victory in our legal challenge to the National Labor Relation Board’s “Notice Poster Rule.” The rule would have required virtually every employer in the country—including mom-and-pop shops—to prominently display a poster outlining employee “labor rights.” But, we took issue with the idea that the government was seeking to make business owners the mouth-piece of the labor movement. So, we sued.   

Last year we secured a victory in the Federal Court of Appeal for the D.C. Circuit, striking down the Notice Poster Rule. Executive Director Karen Harned said the following, with regard to NLRB’s decision not to seek review in the Supreme Court:

“Today’s announcement is a victory for small-business owners who have been subjected to the illegal actions of a labor board that has consistently acted outside of its authority and failed in its duty as a neutral arbiter. The National Federation of Independent Business has led the charge – as a plaintiff – against the NLRB’s “Notice Posting Rule” decision, because it served as blatant pro-union propaganda. We are pleased the labor board has decided to comply with several court rulings and declined to pursue this troubling agenda.”

From the 1000 foot level, this was a major victory for small business because the decision reinforced the idea that federal agencies have only limited powers—and specifically that NLRB lacked the power to require employers to put up a poster like this. But this was also a very tangible victory for small business owners. For one, they can now decide for themselves whether to put up the Notice Poster. And that’s a big deal, because we saved countless business owners from lawsuits and penalties that they would have faced if the rule had gone into effect, if they had neglected to comply.

For further commentary, check out my previous post dissecting NLRB’s argument in the Court of Appeal.

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Governor Cuomo’s State of the State Address – What Small Business Needs to Know

Yesterday, Governor Cuomo delivered his fourth State of the State address.  It was a panacea of  proposals covering the entire spectrum of public policy.  NFIB/NY’s response was generally positive and receptive to the tax and regulatory reform proposals, with some caveats.

Starting with the regulatory reform…

New York’s onerous regulatory climate has long been a deterrent to economic investment and success.  It is unquestionably correct that the Governor focus in this area.  Coming off 2013′s success in enacting necessary reforms to workers compensation and unemployment insurance, there is some positive momentum here.  The Governor announced that there will be a “task force” or commission type entity announced in the near future to focus on regulatory barriers.  Perhaps the Governor has such a committee already in place that could be well suited to this effort?

Now for the tax reform piece.

NFIB/NY strongly supports the business tax cuts (no surprise).  Reforming the estate tax is critical for our family farms and small businesses in general.  Manufacturer’s, particularly in Upstate New York, would see a – pardon the “Albanyism” – “game-changing” tax cut and the corporate rate would be reduced.  All three of these proposals are within NFIB/NY’s 2014 legislative agenda.

However…

NFIB/NY strongly opposes a “circuit breaker” tax shift concept and we explicitly state this position in our legislative agenda.  We have been championing the call for significant mandate relief since the property tax cap was enacted in 2011.  A “circuit breaker” will NOT reduce the property tax levy at all, only shift payment responsibilities.  Hence, where’s the mandate relief?

Would enacting a “circuit breaker” reduce the likelihood moving forward that any more mandate relief discussions would take place?  How will it alleviate the crushing fiscal crisis our communities and schools are facing?  Will allocating state funds to enact a circuit breaker reduce the potential for tax cuts in the near future?

Today, the Poughkeepsie Journal editorialized that the tax relief plans should be open to debate and discussion rather than passed as is.  We agree.  The rhetorical questions I asked above need to be answered and thought through.

Also, the majority of small businesses are set up as pass-through entities.  Meaning, business owners pay their business taxes through their personal income tax filings.  Absent broad tax relief that includes a PIT reduction, many small businesses will be left out of the substantial tax reform put forth by the Governor. This cannot be immediately acceptable.

If we can get lawmakers and the Governor in Albany to open up the discussion on tax reform, perhaps we can broadly ensure that our fiscal and economic present and future is both enhanced and received by all.  The Governor has already put us on an ambitious path to tax reform, NFIB/NY is going to push to see that these proposals have an even greater impact.

 

 

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