Small Business News
July 2005 | Online Edition
Lawmakers Bashed Business This Session — Business Climate Worsens
By Malia Zimmerman, HawaiiReporter
Despite Hawaii, in numerous national rankings, being rated the worst business climate in the nation, lawmakers in the 2005 Hawaii Legislative session found ways to make conditions even more restrictive and burdensome for business owners.
Hawaii lawmakers did not pass legislation helpful to business, and in fact, passed five major bills extremely detrimental to small businesses and the economy, garnering them collectively a scathing ranking of “F” from Paychecks Hawaii, the political action affiliate of Small Business Hawaii.
Paychecks Hawaii, which also ranks on a scale of 1 to 5 lawmakers for their advocacy for business (1 being the highest ranking), cited five major bills that passed this session as the most detrimental to businesses. They are:
HB 1309 allows counties to increase the state’s General Excise Tax by 12.5 percent to fund specified transportation related projects, including a $2.75 billion heavy rail system on Oahu. Hawaii residents already have the overall highest tax burden in the nation, and hoped the state and county governments would provide tax relief, not increases, as the Senate president and governor announced early in the session. Although the governor has not said whether she will allow the bill to become law, she is considering allowing it to pass, despite signing the “No New Taxes” pledge with the national group, Americans for Tax Reform.
HB 1308 increases the state’s conveyance tax and requires that 25 percent of real estate conveyance tax collected be deposited into the land conservation fund to be used to subsidize affordable housing, rental housing and land purchases by the state. Land owners opposed to the tax increase say the conveyance tax was originally founded as a fee, which they paid to transfer a mortgage, lease or other land related documents, and should not be used to subsidize government projects, rental housing, affordable housing and land purchases by the state.
SB 55 requires employers to give employees rest or meal break periods for at least 30 consecutive minutes after working 5 or more continuous hours. The state government already mandates that employees get breaks, but this law expands the requirement telling employers when the employees should get breaks. This law in inconvenient for certain kinds of businesses, including those that might be receiving goods from trucks in a line, those that work in food lines or restaurants, or businesses that have irregular schedules and projects.
SB 294, SD2 increases the state’s minimum wage to $7, beginning July 1, 2005, and provides for an annual automatic increase thereafter. The new minimum wage law did not give any additional relief to businesses, including an increased tip credit the restaurant owners pushed for. Business owners say what many lawmakers don’t understand is as the minimum wage is increased, so is the amount employers have to pay in mandated benefits. Small Business Hawaii estimates employers pay an additional 38 percent to 55 percent of the employee’s salary in mandated benefits, including workers’ compensation, matching withholding, temporary disability insurance and other liability insurance. In addition, less than 3 percent of the population makes minimum wage because it is an entry level wage, during which time business owners and managers spend approximately 50 percent of their time training these entry level people, including many teenagers in temporary jobs. What the minimum wage increase does is bump up the pay scale for all hourly wage employees, opponents say, because once the minimum wage increases, the pay scale rises. This increase will result in a loss of jobs or businesses refusing to fill vacant positions, they say, because they cannot afford to pay. The cost of goods and services, in some cases, also will increase, so the costs are passed onto the consumer.
SB 1808 amends the state’s workers’ compensation law, and puts further mandates on businesses, including vocational rehabilitation providers. The bill also limits the ability of the Department of Labor director to make rules and directives that will allow prompter service for employees and reduce workers’ compensation costs among local employers.
Hawaii’s Republican governor, Linda Lingle, has until midnight June 27, 2005, to either veto the bills or give notice that she will do veto the bills by July 12, 2005 and all bills that she does not give notice of intent to veto by June 27 will become law, either with or without her approval.
While the Senate Republicans nearly unanimously voted against all of these bills (with the exception of Sen. Paul Whalen, R-Big Island, who voted for the minimum wage increase), many of the House Republicans, who claim to be supportive of business, voted in favor of the bills, leading to a drop in their Paychecks Hawaii ranking.
Meanwhile, some of the Democrats in the House and Senate saw their rankings jump or decrease a point in the Paychecks ranking, depending how they voted on these five bills.
The voting records of individual lawmakers on these five bills are located on our website at smallbusinesshawaii.com. Look for the link labeled “Legislative Matrix”.
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