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State Policy Update - July 28

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FOOD AND BEVERAGE

Sugar / Soda Tax:

A campaign on the health impacts from the consumption of sugary drinks has led to about a dozen areas around the nation instituting soft-drink taxes.  USA Today reports on the various areas that have implemented these taxes, the debate, and the challenges surrounding the tax.  “"Any business will be very concerned about a tax that discriminated against their own customers," said William Dermody, the American Beverage Association's vice president of policy. "This is the worst tax you can pass. It’s highly destructive."”

In Illinois, Cook County Circuit Judge Kubasiak will rule on July 28 on the controversial penny-per-ounce sugar-sweetened beverage tax.  The tax was set to go into effect July 1, but it has been on hold after Judge Kubasiak blocked the implementation of the tax. The tax would apply to a wide variety of sugar and artificially sweetened beverages.  The Illinois Retail Merchants Association and several grocers say the tax is vague and unconstitutional.  The retailers argue that “under the Illinois Constitution, similar objects should be taxed uniformly. Under the sweetened beverage tax, drinks in bottles, or from fountain machines, are taxable. But on-demand, custom-sweetened beverages, such as those mixed by servers or baristas, aren't subject to the tax.”

The Massachusetts state legislature is considering legislation that would create a tiered excise tax on sugary drinks.  NACS reports that “while the proposal would levy a 24-cent tax on a 12-ounce can of soda, the burden would be steeper on powdered drink mixes because the tax would be applied on a per-ounce basis once the beverage is mixed.  Kevin Dietly, a consultant for the American Beverage Association, said that if the policy takes effect, the cost of a 4C Iced Tea mix would skyrocket to $17.92 for a product that typically costs $3.99.”

In Pennsylvania, the American Beverage Association petitioned to appeal a decision by the Commonwealth Court upholding the Philadelphia Beverage Tax to the Pennsylvania Supreme Court. Petitioners argue that “[Philadelphia’s] soda tax is unconstitutional because it taxes sodas and other sweetened drinks that are already taxed at the state level.” They also argue that “the soda tax violates the Uniformity Clause of the Pa. Constitution because the tax is applied based on the size of the drink.”

Tobacco Products:

Delaware just passed a law that impacts vapor products, commonly known as e-cigarettes or vape products.   House Bill 242, signed by Governor John C. Carney Jr. on the July 3, will place vaping products under the same umbrella as regular tobacco products by amending the definition of “tobacco products” to include vapor products.  The bill also Increases the tax on all cigarettes, tobacco products other than vapor products, moist snuff, and cigarettes from 15% of the wholesale price to 30% of the wholesale price, and imposes a tax of 5 cents per fluid millimeter of vapor product.

Labor

Wages:

The University of Washington conducted a study on the impacts on Seattle’s minimum wage and published it through the National Bureau of Economic Research (NBER).  The study “evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.”

Following the University of Washington’s research on the impact of Seattle’s minimum wage, Bloomberg takes a look at the winners and losers of minimum wage and addresses reactions to UW’s study.  “One group of economists rushed out a study of their own — at the request of the Seattle mayor’s office, which was apparently concerned about the results of the Vigdor study — that found results more favorable to the high minimum wage.  One member of that group declared that the Vigdor study is “not credible.””

Several universities, including the University of Minnesota, are conducting studies about the impacts of an increase in the minimum wage for their city.  “The movement toward $15 hourly wage laws in the U.S. has caught the attention of University of Minnesota experts.  After Minneapolis passed an ordinance June 30 to bring the $15 minimum wage by 2024 and two recent studies evaluated Seattle’s climb to $15, several researchers and experts weighed in on what the change could mean for Minneapolis.”

In Maine, “a November referendum to raise both the regular and tipped minimum wages — $7.50 and $3.75, respectively — won with 55 percent of the vote. (It required a simple majority.) But almost immediately after the vote was tallied, tipped servers began to complain that the result would hurt their livelihoods.” The Washington Post reports how servers actively campaigned to overturn the results of the referendum that raised servers’ hourly wages.  Many of them “feared the higher costs to owners would lead them to raise prices or cut shifts.  Then, in June 2017, Maine’s legislature passed a Republican measure that will go into effect in January 2018 that lowers the tipped wage down again.

In California, new minimum wage laws went into effect in several locales on July 1, including:  Emeryville, City of Los Angeles, Los Angeles County (unincorporated areas only), Malibu, Milpitas, Pasadena, San Francisco, San Jose, San Leandro, and Santa Monica.  Each of these locales have different minimum wage laws.

In California, AB 5 was introduced to “create the Opportunity to Work Act. The bill would require an employer with 10 or more employees to offer additional hours of work to an existing nonexempt employee before hiring an additional employee or subcontractor, except as specified, would require an employer to post a notice of employee rights, as specified, and would require the employer to maintain certain documentation. The bill would authorize an employee to file a complaint for violation of these provisions with the division and to, in the alternative, bring a civil action for remedies under the act. The bill would require the division to enforce these provisions, as specified and would authorize the division to, among other things, adopt rules and regulations. The bill would make a violation of these provisions punishable by a civil penalty. The bill would also define various terms for these purposes.”  The bill remains in the Appropriations Committee; it has not passed out of the Committee, Assembly or Senate.

In Missouri, a new law will go into effect on August 28 that prohibits local governments from setting a higher minimum wage than what the state requires.  Under this law, St. Louis’ minimum wage rate will decrease from $10 to the state’s standard of $7.70.  CNN reports that Missouri Governor Eric Greitens stated, “This increase in the minimum wage might read pretty on paper, but it doesn't work in practice. Government imposes an arbitrary wage, and small businesses either have to cut people's hours or let them go.”  He also cited University of Washington’s study on Seattle’s minimum wage hike to $15 an hour.

Paid Medical or Family Leave:

New Jersey Governor Chris Christie issued a conditional veto on a bill that would have expanded paid leave for workers in the state.  The Governor argued that the bill would increase taxes and have a negative impact on businesses in the state.  Under the bill, the eligibility period for family leave insurance would have increased from six to twelve weeks, the cap on weekly benefits would have increased from $633 to $932, and it would have added siblings, grandparents, grandchildren and parents-in-law to the list of caregivers who could take the benefits.  The bill would have also The bill would also have expanded benefit access to those who work for companies with at least 20 employees, instead of the current 50. 

In early July, Washington joined California, New Jersey, New York, Rhode Island, and Washington, DC in providing workers with paid family leave. Washington’s law, paid through payroll taxes, provides paid time off for workers on medical or family leave beginning in 2020, including a family member’s serious health condition, the worker’s own serious health condition, a child’s birth or placement of a child, or a military exigency. The new law offers workers 12 weeks of paid family leave. In 2020, the law requires benefits be paid up to 50 percent of the individual’s salary, capped at 50 percent of the state average weekly wage. The benefits increase each year until 2023, ultimately reaching 67 percent of the individual’s salary, capped at 67 percent of the state’s average weekly wage.

The Washington Hospitality Association makes a strong case on why advocacy and engagement with your state government matters. The Association was a key player in negotiations and helped craft a reasonable solution that met the needs of all stakeholders, including all businesses. In addition to the provisions stated above, the law provides for an exemption for small businesses, financial assistance for small and medium sized businesses, flexibility for large businesses that already provide leave programs, consistency with FMLA, and no new requirements related to job retention or health care coverage beyond what is required in federal law.

Alcohol

Ignition Interlocks:  

A new law in Georgia went into effect on July 1 that requires some first-time DUI offenders to install an ignition interlock device in their vehicles.

A new law in Pennsylvania will require first time offenders with a blood alcohol level higher than .10 to have an ignition interlock installed on their vehicle.  The law, signed last year, goes into effect on August 25.

Alcohol Distribution:

The Associated Press reports, “The Indiana Supreme Court has denied an affiliate company of the state's largest beer and wine distributor the ability to distribute liquor.”  It found that “Spirited is a separate company, but the high court found that Monarch and E.F. Transit Inc., which owns Spirited, share the same five shareholders and aren't separate enough.”  "There can be no doubt that Indiana is empowered to do what the Commission has urged here — which is to bar companies with same ultimate owners from simultaneously holding both beer and liquor-wholesaler permits," Justice Steven David wrote in the ruling.  Indiana is the only state in the US that does not allow wholesalers to distribute both beer and liquor.

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