Higher Minimum Wage, More Paid Leave, Lower Taxes: Key Issues in State Legislatures Across the Country

March 2, 2023

Major Trends Sweep Across State Legislatures in 2023

Higher Minimum Wage, More Paid Leave, Lower Taxes: Key Issues in State Legislatures Across the Country

In addition to Congress, NFIB and its members advocate for small business interests in all 50 state capitals. State-level issues are highly significant even beyond the state’s borders because a new law passed in one state is often mimicked elsewhere in the country. In early 2023, state legislatures across the United States have addressed three key issues for small businesses: minimum wage, paid leave, and tax relief. Minimum Wage At the start of 2023, a number of states saw an increase in their minimum wage rates largely due to high inflation, increasing the minimum wage in states that index minimum wage to the Consumer Price Index. Other states have passed scheduled increases or ballot initiatives to raise their minimum wage. California, Massachusetts, Connecticut, Massachusetts, and parts of New York have the highest minimum wage rate in the country at $15 per hour. Georgia lawmakers introduced a bill to increase the minimum wage rate from $5.15 per hour to $15 per hour by January 2024, with exceptions for some very small businesses as well as high school and college students. While workers in more than half of the states saw an increase in minimum wage rates this year, state lawmakers continue to introduce proposals that would increase the minimum wage. Earlier this year, Georgia lawmakers introduced a bill to increase the minimum wage rate from $5.15 per hour to $15 per hour by 2024. Maryland lawmakers are considering a bill that would accelerate the state’s scheduled increase to $15 per hour by October 2023 instead of 2025. New Mexico lawmakers seek to establish the country’s largest minimum wage at $16 per hour by 2024. Rhode Island lawmakers propose a $20 minimum wage by 2025, and New Mexico lawmakers seek to establish a minimum wage at $16 per hour by 2024. New York lawmakers are considering a proposal that would raise the state’s minimum wage to $21.25 per hour by 2027 and index it to inflation. The New York proposal is expected to have an economic output loss that would exceed $19 billion, according to an NFIB commissioned study. Other states have introduced proposals that would not necessarily raise the minimum wage rates but would allow for higher rates on the local levels. For instance, Idaho lawmakers have introduced a bill that would allow cities and counties to set their own minimum wage standards. The state’s minimum wage remains at the federal minimum wage of $7.25. Paid Family and Medical Leave Establishing paid family and medical leave programs is a top priority for state legislatures this year. Several states have introduced bills to create mandatory paid leave programs funded through employer/employee payroll contributions. Eleven states currently have mandated paid leave programs. The states of Colorado and Oregon are among the eleven states that have passed paid leave proposals in recent years and are set to go into effect this year. In addition, Maryland and Delaware have passed paid leave legislation that will go into effect in 2025 and 2026, respectively. Nebraska has introduced the Paid Family and Medical Leave Insurance Act, which would create a mandatory paid leave program in the state, financed through employer contributions and providing up to twelve weeks of leave for eligible family and medical events. Minnesota legislators are considering a paid leave bill that would require employers to offer up to 48 hours of paid time off per year, as well as a bill that would allow most workers to take up to 12 weeks a year of paid family and medical leave. The Illinois legislature has passed the Paid Leave for All Workers Act, which requires a minimum of 40 hours of paid leave per year for all employers. The bill is pending Governor Pritzker’s signature. In addition to mandatory paid leave legislation, there has been increasing attention to voluntary paid leave proposals in recent years. Virginia became the first state to enact such legislation in the 2022 legislative session allowing employers to purchase paid leave insurance. Vermont is set to launch a voluntary paid leave program for state and private employers in 2024. In 2021, New Hampshire passed a voluntary paid family leave program that provides up to six weeks of leave and sixty percent wage replacement for medical and/or family events. Tax Relief During the 2022 legislative session, 35 states passed laws providing tax cuts largely due to increased budget surpluses. This year, states including Arizona, Arkansas, Idaho, Indiana, Iowa, Kansas, Kentucky, Missouri, Mississippi, New York, and North Carolina will see tax reductions due to individual income tax cut legislation taking effect. In the 2023 legislative session, state lawmakers continue to introduce proposals this year that would provide tax relief. In West Virginia, House lawmakers have passed a bill reducing the state’s income tax by 50%, while Nebraska Governor Jim Pillen has unveiled tax cut proposals to accelerate the scheduled income and business tax cuts to 3.99% by 2027, from the scheduled decrease to 5.84% by the same year. Wisconsin lawmakers also considering a bill to gradually reduce the state’s income tax and create a 3.25% flat tax system, and Arkansas lawmakers introduced a bill that would reduce the state’s income tax from 4.9% to 4.5%. Other significant issues trending this year in state legislatures include:

Predictive Scheduling: Lawmakers in several states have introduced proposals requiring retail and food service establishments to provide advance notice of work schedules and compensate employees if changes occur without adequate notice. Predictive scheduling proposals (also called predictability pay or Fair Workweek) have been primarily passed on the local levels in several major cities, including San Francisco, New York City, Philadelphia, Chicago, and Seattle. Oregon is the only state to have passed a statewide predictive scheduling law. Four states, Iowa, Arkansas, Tennessee, and Georgia, have laws in place prohibiting local governments from enacting predictability pay proposals.
Unemployment Insurance Benefits: Several states are considering reductions of unemployment benefits. West Virginia’s Senate has passed a bill to index unemployment benefits to the state’s unemployment rate, including reductions to the period of benefits if the unemployment rate is below certain thresholds. Wyoming lawmakers are considering a similar bill as well as an absolute reduction to maximum unemployment benefits, and Tennessee is tightening requirements for those receiving unemployment benefits to find a new job.
Clean Energy Initiatives: One of largest trends as of late are proposals establishing all-electric buildings to curb greenhouse emissions and fight climate change. California and Washington have such laws statewide, while Colorado, Oregon, and New York have them on the local level. Massachusetts, Oregon and New York are considering statewide laws, and twenty other states have preemption laws prohibiting municipalities from enacting all-electric building laws.
The other major trend is new clean car standards, banning or reducing the sale of gas-powered vehicles in states. Last year, California Air Resources Board voted to ban the sale of new gas-powered vehicles and light trucks by 2035. Several states that follow California’s emission standards are expected to implement similar regulations. The states of Oregon and Washington have taken steps to implement California’s revised standard. Other states, such as New York, New Jersey and Massachusetts, are expected to follow suit.