Top Four Goals: Raising the business equipment tax exemption, fighting the return of three bad ideas.
Although any issue can crop up at any time during a legislative session, NFIB is expecting the return of three bad-for-small-business proposals and one good one when the 66th Montana Legislature convenes for business in 2019.
Support Increasing the Business Equipment Tax Exemption
Although an understandably tough sell in 2017, given a tight state budget and dicey revenue expectations, NFIB will continue its lobbying fight for raising the exemption level on the business equipment tax from its current $100,000. Last session’s Senate Bill 327, which NFIB supported, called for it to increase to $350,000.
Also known as a Tangible Personal Property Tax (TPP), a business equipment tax “imposes significant economic distortions,” according to the nonpartisan Tax Foundation. “Montana is an extreme example of a state that imposes different rates on different types of property. It has 14 classes of property,” according to the Foundation’s background paper, States Moving Away From Taxes on Tangible Property.
According to the Montana Department of Revenue, “Personal property includes business equipment, mining and manufacturing machinery, agricultural implements and equipment, furniture, fixtures and all other property not included in any other class of property. Equipment that is depreciated as a business asset for income tax purposes is taxable for property tax purposes. Property that is ‘depreciated out’ for income tax purposes remains taxable for property tax purposes.”
The class of property most troublesome for small business is No. 8, of which the department lists 56 taxable items, including some vague enough (specialized equipment, tools, e.g.), to invite very liberal interpretations of by auditors.
“States and local governments seeking to reduce economic distortions and improve competitiveness through the tax code should reduce (or eliminate) TPP taxation,” advises the Tax Foundation.
Stopping State-Run Retirement Plans
Last session, Senate Bill 346 creating state-run retirement plans for private employees was well on its way to passage—until NFIB stepped in.
The bill had passed the Senate Finance Committee 16-2 and the full Senate 28-22. But when NFIB/Montana noticed something others had failed to see, the measure was killed almost instantly. That something was new federal rules that could have held an employer financially responsible when investing an employee’s money if an employee determines that the employer was not diligent enough.
SB 346 would have set up a state-run retirement program for small businesses within the Department of Commerce. Small employers could opt to sign up their employees and deduct the contributions of the employees from their paychecks. This is similar to the current program called 529 that allows persons to save money tax-free for college educations. This program is run by the state of Montana.
NFIB will give extra scrutiny to another expected attempt to bring up state-run retirement plans for flaws like employer financial responsibility while also reminding lawmakers of the many private options available for retirement savings. It is not something the state needs to involve itself in.
Fighting to Keep Entry-Level Wage Opportunities for Montana’s Young
Last session, NFIB helped defeat a proposal (House Bill 169) to increase the state’s minimum-wage rate primarily by reminding legislators of the punishing effects raising rates has on teens and young adults starting out their work lives and that no credible study shows increasing minimum-wage rates correlating to lifting anyone out of poverty. Still, NFIB expects other attempts to boost the rate to surface in the 2019 session.
The minimum wage is earned by just 2.7 percent of the nation’s workers, according to the U.S. Bureau of Labor Statistics, and most of them “tend to be young. Although workers under age 25 represented only about one-fifth of hourly-paid workers, they made up about half of those paid the federal minimum wage or less. Among employed teenagers (ages 16 to 19) paid by the hour, about 10 percent earned the minimum wage or less, compared with about 2 percent of workers age 25 and older.”
Defeating Paid Leave Proposals
The good news is that that vast majority of businesses already offer paid or unpaid time off for a variety of reasons, sickness, care for a family member, victim of domestic violence (see infographic here).
As NFIB has pointed out, “Small businesses know their employees on a more personal level, and most offer paid time off on a case-by-case basis, providing the employee what he or she needs in a way the business can afford. Mandatory paid leave would only impose unnecessary limitations on these businesses. Such initiatives assume one size fits all. But particularly in the small business world, what works in one company could be detrimental for the next. The rigid nature of these programs often has a negative impact on employee morale.”
Last session, House Bill 392 sought to implement such a one-size-fits-all, rigid system. It would have created a special insurance program run by the state that would pay weekly benefits to covered employees who take leaves of absence for family or medical needs. The benefits would be set on a sliding scale determined by the employee’s wages, much like the current unemployment insurance fund. The funds to support this insurance program would have come from contributions by both the employer and the employee. This bill was tabled in a standing committee with strong opposition from
NFIB/Montana. A similar proposal is expected to surface again in 2019. For more information on how devastating paid leave proposals could be, the Research Foundation of NFIB took a detailed look at a federal proposal, using sophisticated BSIM modeling (Business Size Insight Module). It can be read here.
Preventing Local Governments From Being Able to Levy Local-Option Taxes
NFIB expects local-option taxing powers to be brought up at the next legislative session in 2019. NFIB will oppose such expansion of local government taxing authority, as directed by past NFIB/Montana-member state ballot results. While it was a win for NFIB/Montana in the 2017 session, the war on government spending is an ongoing battle.
Other Issues NFIB is Expected to Fight
- Imposing a new state sales tax
- Raising the income tax
Monitoring Equal Pay Proposals
In 2013, Gov. Steve Bullock issued a proclamation creating the Governor’s Equal Pay for Equal Work Task Force. NFIB strongly supports equal employment opportunity and appropriate enforcement of the federal Equal Pay Act, which protects all employees, and Title VII of the Civil Rights Act of 1964.
Federal and state law already prohibit gender discrimination, including workplace compensation and benefits, but so-called “equal pay” legislation proposed in states are typically little more than increased penalties for behavior that is already against the law. While increasing penalties may enrich a few attorneys who file questionable lawsuits against numerous small-business owners who don’t have the resources to fight frivolous cases in court, they will do little or nothing to improve wages for women. NFIB/Montana will carefully monitor all legislation regarding this matter and oppose proposals that do nothing more than unfairly punish small businesses.