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BPAA Biweekly State Policy Updates - May 3, 2019

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BPAA is pleased to provide the following biweekly update on state policy. Please contact Tom Schreibel at tbschreibel@michaelbeststrategies.com if you have any questions or updates on activity in your state.

Visit BPAA’s website at http://bpaa.com/bpaa/government-affairs/summary to read previous federal and state policy updates.

Labor Update

  • Bloomberg Government reports - Wisconsin Could Be First State to Exempt Tipped Income: Wisconsin could be the first state in the country to provide an income tax exemption for cash tips paid to bartenders, wait staff, taxi drivers, hair stylists, and other service industry workers. Two Republican lawmakers introduced legislation April 25 amending the Wisconsin tax code to eliminate income tax liabilities for tipped wages paid in cash. Tips paid from a credit card or some other electronic payment method maintained by the employer would continue to be subject to Wisconsin’s income tax. The proposed law would have no impact on tipped workers’ federal income tax obligations. Joseph Bishop-Henchman, an authority on state tax code trends and vice president of the Washington-based Tax Foundation, said he is unaware of any other state exempting tipped wages. It is unclear whether the proposed law would be supported by Democratic Gov. Tony Evers, who is promoting a plan to boost Wisconsin’s minimum wage to $10.50 per hour by 2023.
    • $40 Million in Tax Relief: An informal analysis of the proposal by Wisconsin revenue officials estimates it would cut taxes by $30 million to $40 million, bill sponsor Rep. Cody Horlacher (R) told Bloomberg Tax. As with all workers in Wisconsin, tipped workers are entitled to the state’s $7.25 per hour minimum wage. Employers, however, are permitted to claim a tip credit, paying tipped employees as little as $2.33 an hour. If the hourly wage plus tips earned don’t add up to at least $7.25 an hour, the employer is required to make up the difference.
    • Horlacher said his bill serves as a boost for service industry workers without tinkering with the minimum wage. In addition, the bill is a recognition of the inherent tax collection problems associated with tipped wages and a recruiting tool for employers in the restaurant, tavern, tourism, and transportation industries.
  • Report: Increasing the minimum wage to $15 would imperil 350,000 WI jobs: Roughly 350,000 Wisconsin workers would be at risk of losing their jobs as a result of increasing the minimum wage to $15 an hour, according to a new policy brief published by the Badger Institute. "The High Cost of Increasing the Minimum Wage in Wisconsin to $15," authored by economists and Badger Institute Visiting Fellows Ike Brannon and Andrew Hanson, examines the economic impact in Wisconsin if lawmakers were to mandate a 107% increase in the minimum wage as Gov. Tony Evers and others have recommended. The 350,000 workers who would lose their jobs represent nearly one-third of all workers currently earning a wage below the proposed new minimum. Half of the job loss would come from the bottom 10% of the income distribution, and 90% would come from the bottom quartile of the income distribution. Read the full report here.
  • On Minimum Wage, What We Know Is That We Don’t Know: Economists who have studied minimum wage increases from coast to coast and overseas agree that workers are better off when wages rise. But there’s little consensus on the impact to businesses and the economy. The Vermont Legislature is examining a proposal to raise the minimum wage — now $10.78 an hour and linked to increases in inflation — to $15 an hour by 2024. It’s a big step up. Similar wage increases in other areas are so recent it’s too soon to use them as guides for what might happen in Vermont as a result. Without that precedent, the Vermont wage increase would be an experiment of sorts for the state. “The proposed minimum wage increase is outside the bounds of anything that has been done or studied,” said Tom Kavet, a state economist. “It’s not study-able. The California market is different from the Vermont market. Until the wages are in place, we can’t really know what the impacts are.” Read more here at VTDigger.
    • A bill that would increase Vermont’s minimum wage to $15 is idling in a House committee over concerns about whether some Medicaid-funded health care workers should see higher pay, if the legislation becomes law. Read more about it here at VTDigger.
  • A Minimum Wage Hike In Florida Would Cost The State $540 Million In 2027, Report Says: There's a price tag that comes with Florida's proposed minimum wage hike. According to the Financial Impact Estimating Conference, which submitted its calculations Monday to the Florida Secretary of State's office, the Sunshine State would be on the hook for roughly $540 million in 2027 if the proposed amendment qualifies for the November 2020 ballot. The officials also note in their estimate that it would cost millions more in the five-year lead-up to the full $15 minimum wage implementation. If successful, here's how it would work: If the group Florida For A Fair Wage, led by Orlando attorney John Morgan, gathers the necessary 766,200 signatures to place the proposed measure on the 2020 ballot (the group currently has more than 96,000), and if Florida voters then approve the measure in next year's election, it would then call for $1 per hour annual increases that culminate at $15 per hour in September 2026. Read more here at Orlando Weekly.

Tax Update

  • Democrats push back on Lamont, renew bid to tax CT’s wealthiest households: Gov. Ned Lamont and his fellow Democrats in the legislature appear to be headed for a showdown over taxing the rich to help solve Connecticut’s pension debt crisis. One day after gutting a 2 percent surcharge on capital gains earnings by the wealthy, the legislature’s Finance, Revenue and Bonding Committee revived the surcharge. The surcharge was the centerpiece of a new revenue plan that would scale back Lamont’s efforts to broaden the sales tax, but also slow his initiative to provide property tax relief to the middle class. The committee’s plan also would:
    • Replace Lamont’s sugary beverages tax with a one penny sales tax increase for restaurant food and prepared meals.
    • Establish a new excise tax and a special sales tax rate on the sale of marijuana for recreational use.
    • Expand the state’s bottle deposit program and increase the excise tax on alcoholic beverages.
    • Back the governor’s plans to tax vaping products and plastic bags.
    • Renege on a promised tax cut for hospitals, a decision that was also recommended by the governor.
    • Eliminate the gift and business entity taxes.
    • And tap more than $250 million of the state’s reserves to help close major projected deficits in the next two-year budget.
    • Read more here at CT Mirror.
  • Bloomberg Government reports - Oregon House Advances $2.1 Billion Commercial Activity Tax Bill: Oregon’s House passed a commercial activity tax bill late May 1 that would impact about 40,000 businesses in the state with sales over $1 million. The tax would be levied at a rate of 0.57 percent on taxable commercial activity above $1 million after subtracting 35 percent of the greater of input costs or labor costs. It would go into effect in tax year 2020 and raise an estimated $2.1 billion in revenue in the 2021-2023 biennium, Legislative Revenue officer Chris Allanach told Bloomberg Tax May 2. H.B. 3427, dubbed the Student Success Act, would also reduce by 0.25 percent the personal income tax rates for the three lower brackets that under current law are at 5, 7 and 9 percent. Revenue from the measure would support schools.
    • House Democrats flexed their supermajority muscles to pass the measure on a party-line vote. Senate Democrats have a supermajority too, but can’t afford to lose even one member for the measure to pass, Sen. Mark Hass (D), chairman of the Committee on Finance and Revenue, told Bloomberg Tax May 2.
    • Supportive Corporations ‘Enlightened’: Hass declined to predict the outcome of the floor vote, currently scheduled for next week, other than to say “I feel good about it.” Hass said Gov. Kate Brown (D) will sign the bill into law if it reaches her desk.
  • Bloomberg Government reports - Oklahoma Tax Deduction Cap Workaround Signed Into Law: Oklahoma is the latest state to join the ranks of those with workarounds to the federal cap on deductions for state and local taxes paid. Oklahoma Gov. Kevin Stitt (R) signed H.B. 2665 into law April 29, creating an optional pass-through entity tax with an offsetting income tax exclusion beginning in the 2019 tax year.
    • Members who are natural persons would be subject to the highest Oklahoma marginal income tax rate of 5 percent, according to the bill summary. Members that are C corporations and pass-throughs would be subject to a rate of 6 percent, according to the bill.
    • The end result means a lowered total tax burden on business in terms of money owed at the federal level, according to an explanatory graphic authored by the State Chamber of Oklahoma.
    • Brian Reardon, S-Corporation Association of America president, told Bloomberg Tax the new law will “help put Oklahoma businesses on an even footing with their competition in Texas.” Texas doesn’t impose an income tax.
    • The law makes Oklahoma the third state with this kind of workaround to the $10,000 cap on the federal deduction for state and local taxes paid created in the 2017 federal tax law. Wisconsin and Connecticut have already enacted pass-through entity taxes.
    • A similar measure in Arkansas failed; one in Rhode Island has stalled; and a proposal by Michigan Gov. Gretchen Whitmer (D) hasn’t gained traction.
  • Kansas Lawmakers Make New Push To Lower Grocery Taxes, Corporate Tax Bills: A sweeping plan that would affect how much Kansans pay for groceries and what corporations owe in taxes may soon head to Gov. Laura Kelly, who vetoed a similar bill earlier this year. Under it, the state is projected to take in $245 million less in revenue over the next three years. The House is expected to debate the bill soon, after the Senate approved it 27-13 on Thursday. Although the new bill is different in some ways from the vetoed one, Democrats continue to condemn it as a corporate handout and Republicans counter that it returns to taxpayers money the state shouldn’t be collecting. Read more at Kansas.com.
  • Here are the taxes Washington lawmakers are voting to raise — and cut: Washington lawmakers Sunday finished approving more than $830 million in new and higher taxes to fund their new 2019-21 operating budget and a separate spending account for higher education programs. The package also includes a tax cut for some Washingtonians.
    • Here’s a look at tax bills lawmakers passed as the Legislature finished its 105-day session — along with who would pay or save:
      • House Bill 2158 raises $376 million over the next two years with increases to certain business-and-occupation taxes. It puts that money toward, among other things, a dedicated account to expand college financial aid and boost high-demand degree programs, such as computer science, nursing and engineering.
      • The tax hikes come in three tiers. The first tier includes businesses primarily making money from services such as architecture, engineering, legal work, insurance and financial work, medical services, software publishing, research for science, online retail and telecommunications. Those businesses would pay a 20% surcharge on their current B&O tax rate.
    • Read more about Washington’s planned taxes here at Seattle Times.

Sports Betting Update

  • Bloomberg Government reports - Sports Betting Tax, Licensing Bill Heads to Tennessee Governor: A bill to tax and regulate online sports gambling is headed to the Tennessee governor’s desk after narrowly winning approval from state legislators. H.B. 1, which got final House and Senate approval on April 30, creates licensing requirements with a 20 percent privilege tax on operators of sports betting websites and apps, plus annual registration fees. The proposed law would apply to betting on professional and amateur sports events, including college sports. Gov. Bill Lee (R) has reservations but plans to let the bill become law without his signature, spokeswoman Laine Arnold said April 30. The new law would take effect July 1.
    • The Senate passed the bill on a 19-12 vote, and the House gave its final approval by a vote of 51-40. “The Governor has said he does not believe that the expansion of gambling is best, but he recognizes that many in the legislature found this to be an issue they want to explore further,” Arnold said in an emailed statement April 30.
    • Tennessee joins at least 10 other states that have acted to regulate and tax sports gambling since the Supreme Court’s 2018 decision in Murphy v. NCAA, according to Sen. Steven Dickerson (R), who sponsored the Senate version of the bill. That decision repealed the federal Professional and Amateur Sports Protection Act of 1992 (PASPA), which prohibited states from authorizing gambling related to professional and amateur sports leagues.
    • Tennessee also legalized fantasy sports operations in 2016. That law imposed a 6 percent tax on fantasy sports operators’ earnings.
  • Bloomberg Government reports - Colorado House Approves Bill to Legalize Sport Betting: Colorado could legalize sports betting under a bill approved by the state House. The measure (H.B. 1327), approved by a 58-6 vote April 24, would provide a master license to Colorado casinos that could then contract with brick-and-mortar and internet sports betting operators to provide sports gambling in the state. The bill would create a Sports Betting Fund to receive revenue from a new 10 percent tax on net sports betting proceeds. The fund would support the Colorado Water Plan.
    • If passed by the Senate and signed by the governor, the measure would go to the November 2019 ballot for taxpayer vote, under requirements of Colorado’s Taxpayer Bill of Rights.
    • Legal sports betting is an option for all states following the U.S. Supreme Court’s May 2018 ruling in Murphy v. NCAA, which repealed the federal Professional and Amateur Sports Protection Act of 1992 (PASPA). That law had prohibited states from authorizing gambling related to professional and amateur sports leagues.
    • Nevada, New Jersey, Pennsylvania, Delaware, Mississippi, Rhode Island, and West Virginia are taking bets. Sports betting is also legal in Arkansas, New York, and Oregon, but those states aren’t taking bets. In New Mexico, only tribal casinos can take sports bets.
  • Bloomberg Government reports - Indiana Assembly Passes Sports Betting Bill With 9.5 Percent Tax: Indiana is close to becoming the latest state to legalize and tax sports betting. The Indiana House and Senate April 24 passed H.B. 1015 , which would open the state’s gambling centers to betting on professional and collegiate sports. Gov. Eric Holcomb’s (R) office is reviewing the bill and won’t comment on whether he’ll sign it, spokesperson Rachel Hoffmeyer said in an April 25 email. The state estimates the bill’s 9.5 percent sports betting tax could raise roughly $12 million annually. The provision was sandwiched into a large casino, racetrack, and riverboat gaming overhaul that could net Indiana nearly $100 million over the next three years through licensing fees and tax tweaks.
    • According to an American Gaming Association tracker, Indiana is one of 23 states considering legislation this session to legalize sports betting following the U.S. Supreme Court’s May 2018 ruling in Murphy v. NCAA. That decision repealed the federal Professional and Amateur Sports Protection Act of 1992 (PASPA), which prohibited states from authorizing gambling related to professional and amateur sports leagues.
    • Nevada, New Jersey, Pennsylvania, Delaware, Mississippi, Rhode Island, and West Virginia are taking bets. Sports betting is also legal in Arkansas, New York, and Oregon, but those states aren’t taking bets. In New Mexico, only tribal casinos can take sports bets.
    • Indiana jumped on the bandwagon despite being the home of the National Collegiate Athletic Association. The NCAA opposes all forms of legal and illegal sports betting.

Beverage Update

  • DD.com reports – (California) Soda tax loses its fizz in Legislature: Lawmakers won’t vote on a soda tax or limit how much can be sold in a single cup this year, marking the latest California victory for the beverage industry. Assemblyman Richard Bloom on Monday delayed his soda tax bill until next year, saying it didn’t have enough support to pass. New taxes need support from two-thirds of lawmakers. Earlier, Assemblyman David Chiu pulled his bill to limit soda sales to cups of 16 ounces in restaurants and convenience stores. Both were efforts to crack down on the soda industry and promote public health.
    • The delay “gives us the time to build the support we need to get to a floor vote,” Bloom said. “This particular measure is opposed by a very powerful contingent of business interests and they’re pouring everything they have into the fight.”
    • The proposals came after California lawmakers last year banned local governments from adopting soda taxes through 2030 under pressure from the American Beverage Association and business groups.
    • The beverage coalition had threatened a ballot measure that would make it harder to raise local taxes and fees of any kind, a move some lawmakers said amounted to hostage-taking to get the desired ban on local soda taxes.
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