Spending Cap Will Ensure Tax Cuts Come To Fruition

The National Federation of Independent Business (NFIB), which supports most of Governor Cuomo’s tax cut proposals, today said the best way to ensure their full implementation is to cap state spending increases at two percent.

“The Governor’s budget assumes that state spending increases won’t exceed two percent over the next two years. That’s a leap of faith that taxpayers shouldn’t have to make,” said NFIB State Director Mike Durant.

The pressure on Albany to increase spending is always heavy, said Durant, and the promise to cut taxes could be easily abandoned next year or the year after.

“The tax cuts depend on fiscal restraint and that’s always the first casualty of politics,” said Durant.  “A two-percent cap would lock everyone in to the commitment that the Governor is making to taxpayers.”

Durant pointed out that the two-percent cap on property taxes, which the Legislature approved, works on the same principle.

“Think of it as belly band surgery for government,” said Durant.  “It’s a way to control Albany’s appetite for more spending.”

To learn more about NFIB please visit www.nfib.com.

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Predictable Fault-Lines in EPA’s Green House Gas Case: Is a 5-4 Decision in the Works?

This week, in the U.S. Supreme Court, NFIB and various other industry groups took the Environmental Protection Agency (EPA) to task over its decision to begin regulating greenhouse gas emissions (GHGs) from stationary sources (i.e. buildings, and standing structures). Although the agency seeks to justify its GHG regulations under the Clean Air Act (CAA), we maintain that Congress never authorized EPA to regulate GHGs in this manner. In previous posts I’ve outlined the basic arguments, and explained the problem with EPA’s boot-strapping rationale.

The big picture problem with EPA’s argument is that it would allow federal agencies to essentially rewrite statutes as they like, and in a manner that would allow them to regulate subjects that Congress never intended. That would mean carte blanche regulatory power for the agencies, and the prospect of unfettered regulation for the rest of us. Of course, that is a concern for small business owners who are already struggling to deal with an over-regulation problem in America.

But, the issue at hand—regulation of GHGs—is of immediate concern to the small business community. Prior to the argument, NFIB issued a statement emphasizing the importance of this case for small business. As Karen Harned, Executive Director of the NFIB Small Business Legal Center explains: “For the small business community complex environmental regulations, like the CAA, only create new burdens. These burdens come from new federal permitting requirements, higher fuel costs, restrictions on fuel choices and energy use, higher electricity costs, and requirements for installation of new energy efficient equipment. And if [EPA’s] rule is allowed to stand, small business owners such as ranchers, farmers, manufacturers, restaurant owners, and others will be subject to even more paperwork, oversight and big time fines.”

Perhaps not surprisingly, the Court offered only mixed signals as to how the case will be decided. As one might well expect, the liberal wing of the court seemed inclined to affirm the D.C. Circuit’s decision, which upheld EPA’s GHG regulation of stationary sources last year. Justice Kagan went so far as to suggest that EPA’s approach to GHG regulations “should be [viewed as] the apex of Chevron deference.”  This refers to the so-called “Chevron doctrine,” which holds that the courts must generally defer to an agency’s interpretation of its own regulations because the agency has special expertise.

But, the more conservative wing of the court was much more skeptical—perhaps a sign that there may be enough votes to strike-down EPA’s GHG regulations. That is what NFIB thinks should happen because agencies should not have deference to rewrite statutes. As NFIB argued, along with the other industry groups in this case, the first rule of the Chevron doctrine is that an agency should only get deference where its interpretation is consistent with the actual text of the statute conferring its authority. And this is ultimately EPA’s problem here.

Justices Ailito seemed to be among those most skeptical of EPA’s position. He noted at one point that EPA’s arguments seem to be in tension with each other. And several of the justices seemed concerned about the principles—or lack thereof—guiding EPA’s approach to GHG regulation. But, as always, it is reading tea leafs when trying to count votes in the Supreme Court. For now, we will keep our fingers crossed. But, conventional wisdom would be that this is likely to be a 5-4 decision—with Justice Kennedy being the crucial fifth vote.

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Estate Tax Reform a Big Deal for NY’s Small Business Owners

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Governor Cuomo included a tax cut package in his executive budget proposal unveiled in January as a nod to struggling businesses in New York State. The package includes several components that are similar to those in the NFIB/NY Legislative Agenda — reducing the corporate franchise tax, eliminating the manufacturers’ tax and reforming the estate tax.  While we take issue with the lack of broad based tax reform and the inclusion of a “circuit breaker” property tax shift, the estate tax component has the potential to be significant for small business.

Earlier this week a new report was released from the Empire Center makes the case for eliminating the “death tax.” The report reasons that the estate tax suppresses economic growth by creating a disincentive to save and invest, and it gives New Yorkers the incentive to move to avoid higher taxes.  New York notably is only one of fourteen states that taxes estates, and it’s a significant consideration when small business owners and farmers are planning for the future.

Unlike many other states that have a higher threshold or those that have repealed the estate tax altogether, New York currently taxes estates valued at over $1 million.  Governor Cuomo’s plan suggests a five-year phase-in to increase the threshold to $5.34 million to match the federal threshold, and he proposes lowering the state’s top rate from 16 percent to 10 percent. According to the Empire Center Report, this will reduce the number of estate filings by 90 percent.

Without these changes to the estate tax, thousands of small businesses and farmers will have a difficult time passing property  to the next generation, as evidenced in the amount of vacant commercial property and farmland sold off across the state.

We were pleased to participate in a press conference with E.J. McMahon of the Empire Center and Jeff Williams of the Farm Bureau discussing this issue and the impact reforming the death tax could have for small business.

Read New York’s Death Tax: The Case for Killing It

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Why does NFIB oppose raising the minimum wage?

This is a question I often hear from people who don’t own small businesses and occasionally get from an entrepreneur who wonders why we take such a position.

Sometimes they follow with another question: “Why don’t you want to help families who are struggling?”

We do want to help families and any who are struggling financially. But simply raising the minimum wage is not an effective way to end poverty. That’s not just our opinion but a reality backed by official U.S. government research.

According to U.S. Department of Labor statistics, half of those who earn the minimum wage are under 26 and aren’t the main source of family income. [See EPI study on number of workers dependent on minimum wage]

But politicians have seized this issue, clouding the true impact it could have on our economy. President Obama has made it a top agenda item.

In his recent State of the Union, he said he would ignore Congress and use “Executive Power” to raise base wages for some federal contractors’ employees. Good politics, but bad news for those working single moms he often touts as examples.

The first question concerned people should ask is “What will happen when that single mom’s employer is forced to make cuts to keep up with rising wages?”

And the second question should be: “Where will her children find their first jobs when they grow up?”

Answer to Question No. 1: Raising the cost of labor forces employers to use less of it. One only has to look at supermarket self-checkout lines to see that technology is steadily eliminating low-skill jobs.

Answer to Question No. 2: Creating jobs where future generations can one day learn the skills necessary to advance in the job market, build careers and stay ahead of technological change is the best benefit they could receive.

Artificially hiking wages ignores the key problem. It doesn’t help many who have jobs: 95 percent of hourly-paid employees already earn above the minimum and worse, it will increase unemployment and prevent businesses from hiring.

Those questioning NFIB’s opposition to government-mandated wage increases should ask themselves: “If I were a small-business owner facing labor costs that account for 70 percent to 80 percent of my operating expenses–costs that I’m unable to absorb–which option would I choose: Raise prices, lay off employees or close my business?”

Any of those options is a dead end for both small businesses and employees.Increasing the minimum wage will make things worse for families, for small-business owners and our economy overall.

It’s important to ask the right questions.

For more information on minimum wage and the impact on small business, visit: http://www.nfib.com/article/raising-the-federal-minimum-wage-240/


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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.)
-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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