BILL NUMBER:S1280           REVISED MEMO 02/03/2015

TITLE  OF  BILL:    An act to repeal certain provisions of the tax law
relating to the minimum wage reimbursement credit

SUMMARY:

Sections 1 through 7 of the bill repeal and amend  those  sections  of
the tax law which relate to the minimum wage reimbursement credit.

Section 8 establishes the effective date.

JUSTIFICATION:

The  2013 New York State Budget raised New York's minimum wage through
a three-year phase-in that will reach $9.00 in 2016. While  there  are
many who believe that this increase did not go far enough, fast enough
and that it should have included local control and indexing that would
cause  the wage to automatically rise along with inflation or the cost
of living, any increase in the minimum wage goes a long way to helping
thousands of hard-working New Yorkers who are struggling just to  make
ends  meet.  However,  the  minimum  wage agreement also included what
amounts  to  a  poison   pill,   in   the   form   of   an   uncapped,
taxpayer-subsidized  credit  that  perversely  incentives  businesses,
including mega-corporations, to replace adult workers  with  teenagers
and keep wages as low as possible.
              

Simply  put,  this  tax  credit is an ill-conceived, counterproductive
piece of policy and a waste of precious resources. While there  is  no
cap  on  the  amount  of  the  credit  that  can  be  allocated, it is
conservatively expected to cost the state between $20 and $40  million
per year. The ostensible goal of improving the employment prospects of
young   people  could  be  vastly  better  served  by  any  number  of
initiatives that would not carry the same disastrous  incentives  such
as more than doubling funding for the Summer Youth Employment Program.

There  is  also  essentially  no  protection  for fired workers. While
firing someone solely to get this tax credit  is  technically  against
the  law, technically only matters if the person who gets fired: knows
about the tax break, knows about the law, knows that she got fired  so
she  could  be  replaced  by  an eligible teenager, can prove that her
employer's desire to access the credit is  the  only  reason  she  was
fired,  and  has  time  to  wait for her case to be resolved within an
overburdened, underfunded system.

This tax credit has been  roundly  criticized  not  only  by  workers'
rights  advocates  and  other  voices  from the left, but by staunchly
business- friendly outfits from the Wall Street Journal to Crain's New
York Business to the Empire Center for New York State Policy. No  less
than  Greg  David  of business-friendly Crain's New York described the
specifics of the tax break as follows:

"The state will subsidize the entire increase in the minimum wage  for
workers between 16 and 19 in the first year and up to 75% in the third
year,  when  the wage is increased to $9 an hour. So firing someone 20
and over  and  replacing  them  with  someone  the  right  age  offers
employers  a bonus of $1,560 to $2,808. Only people making exactly the


minimum wage qualify for the credit, so there is  a  strong  incentive
not to pay any more. Oh, and the credit is available to all companies.
McDonald's franchises upstate will get a lot of benefits; those in the
city  who  routinely  pay  more  than  the  minimum  wage  now have an
incentive to lower wages."

This is a bad and destructive piece of policy and a waste of  taxpayer
dollars.   It   is  in  the  best  interest  of  workers,  responsible
businesses, and the State as a whole that this tax credit be  repealed
immediately.

FISCAL IMPACT:

Significant savings to the state.

LEGISLATIVE HISTORY:

2013-2014: S.4500

EFFECTIVE DATE:

This  act  shall  take effect immediately and shall apply to tax years
commencing on or after January 1, 2015.