Business Legislation Note: This text was loaded to teleprompter and presented live for DBTV, FOX's Sunday-morning small business television show. Capital Watch Talks in D.C., Olympia and Salem today that could change the way you do business tomorrow
By Jennifer Dirks Capital Watch reporter
Could your own tax dollars put you out of business? We’ll take a look at that new mandate out of Olympia, Washington. We’ll also take a look at new workers’ comp rules in Salem, Oregon, and a new Alternative Minimum Tax in the nation’s capital.
On the home front Businesses selling things like furniture and food products could soon have a run for their money. Washington state’s Department of Corrections wants to boost inmate production. And this means businesses will face stiffer competition; competition from the very prisons funded by their own tax dollars.
Businesses in the areas of construction, data processing, office support, furniture restoration and printing also are among the industries targeted for inmate work. Here’s how it would work. Prisons hunt out entrepreneurs willing to put prison workers to work. In exchange, the entrepreneur gets free use of its facilities, free equipment use, discounted utilities, and freedom from paying employee benefits. Though they still have to pay inmates by the hour, in many cases this hourly wage is far less than they’d pay on the outside. Though it’s good for the entrepreneur getting the contract, its bad for businesses that don’t. One such case is playing out now in Washington’s Supreme Court. Prison contractor MicroJet, a water-jet cutting company, has been blamed for putting two other water-jet competitors out of business. Petty? “Not at all,” says Rosemary Brester, owner of Hobart Machined Products in Hobart, Washington. “When you don’t have an equal playing field, it affects businesses like ours substantially,” Brester says. “Once they get a foothold, they have much more leverage than small business. We’re not being subsidized to provide products and services. They are in direct competition, using our tax dollars.” Right now the Association of Washington Business is fighting the Department of Corrections plan. Other organizations expected to join the fight are the Washington State Labor Council and the National Association of Manufacturers. I talked to Rick Slunaker, assistant director for government affairs at the Associated General Contractors of Washington. The association represents 1,000 construction-related companies in the state. “We know there will be competition; that’s a given,” Slunaker says. “But when the correctional facilities are running programs that could be done by private interests, that’s what we take issue with.” Remember, he says, it’s the employers who pay rent, and buy equipment, and give employees the living wages and benefits that keep Washington’s communities alive. Down to Salem Moving down to Salem, lawmakers are tackling Oregon’s first extensive workers compensation reform, since the early-1990s.
The changes could make it a lot easier for employees to win claims. I talked to Jerry Keene, who counts as both an employer and a legal expert. He’s shareholder at the Portland law firm Roberts Reinisch Mackenzie Healey & Wilson PC. He also was instrumental in reforming the system 10 years ago.
“We’re trying to liberalize the law,” Keene says. “Before, it discounted claims for pre-existing conditions that included pre-disposing factors -- things like smoking or sedentary lifestyles. Our goal is to create a narrower definition of pre-existing conditions, which is a more generous standard for workers.”
Let’s say an employee’s arthritis didn’t hurt before, but was aggravated by movement at work. The proposed law would draw the line down the middle … if it’s halfway related to work, then work pays half.
No matter how careful your employees are, or how careful you are, you could still be hit with a workers’ comp claim. Recent Oregon claims included a retail sales manager hurt when her chair broke; a truck driver hurt when he slipped while loading up; and a clerk at a garden store who strained his back lifting a 50-pound, bag of seed.
But there is a silver lining in the bill. Part of the tradeoff for liberalizing the law, is that subcontractors — on construction jobs for instance — might not get sued if workers for other companies get hurt.
“Before, a worker could sue a co-contractor for money,” Keene says. “Under the new provision, if the worker is more than 50 percent at fault they can sue, but it would reduce their damages to zero. It’s a big change here, and it’s very controversial.”
Business lobbyists have been working with a governor’s taskforce to address the issue. A vote is expected by late-July.
On the national front Now on to Washington, D.C., where a new Alternative Minimum Tax, or AMT, is threatening to take a chunk out of your check. This new tax could be levied on ANY entrepreneur with high income, deductions, or exemptions.
Many of the credits allowed on regular income tax forms aren’t allowed when you calculate your AMT. The more credits you claim, the more likely it is that you’ll end up paying alternative minimum tax.
The tax gets its name because it is determined by an alternative set of rules for calculating income tax. It’s an extra tax the government is now requiring a growing number of people pay on top of regular income tax.
Tax attorney Kaye Thomas, who wrote the book “Consider Your Options,” explains it this way: “In theory, these rules determine minimum amount of tax that someone with your income should be required to pay. If you’re already paying at least that much because of the ‘regular’ income tax, you don’t have to pay AMT. But if your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.”
He says the original idea was to prevent people with very high incomes from using special tax benefits to pay little or no tax. But for various reasons the tax is being charged to more people each year, including some people who don’t have very high income and some people who don’t have lots of special tax benefits.
Congress is studying ways to correct this problem, but until it does, almost anyone is a potential target for this tax. I’ll quote from the National Association of Manufacturers’ newsletter: “Beware of the corporate AMT! It strikes when you can least afford it -- when profits are down and the economy is sluggish.”
Check with your accountant to find out if your company is now being charged this alternative tax, or if you should scale back on exemptions in order to avoid it in the future. -- Jennifer Dirks is the business legislative reporter for “Dream Builders TV,” an entrepreneurial issues show aired on FOX 49 at 7:30 a.m. every Sunday. Reach her at jd@thewritersgroup.cc. |