Tax Attic for 9/13/18

This is the time of year when we get a few pieces of legislation from our legislators in Lansing that appears to just come out of the blue, so to speak.  For example, two laws were passed on September 5, to take effect in 2019, that, first, will increase the minimum wage and, second, will require employers to set up a policy to provide sick pay to all employees.  Both of these laws affect nearly every employer in our state.  Before we look at the specifics, let’s look at why these laws came about.  This is one of the situations where citizens gathered enough signatures this year to create a ballot proposal.  In effect, we would get to vote on basically these same two laws in November. If the majority of us voted in favor of the ballot proposal, the proposal would become law as stated. We would have created two laws without any input from the legislature.  It’s easy to see the legislature might be a little concerned with such an occurrence since we elected them to make the laws. However, the legislature does have a card it can play before the ballot proposal is voted upon.  It has the option to pass a law or two laws, in this case, that creates exactly the same laws that we would vote on in November.  By creating the laws, the ballot proposal becomes moot.  But why would the legislature take that step?  After all, the proposal might not even pass.  In my opinion, it’s called taking a calculated gamble. The decision makers in the legislature must believe there is a pretty good chance that this proposal will pass.  If it’s going to become law anyway, the legislature can maintain more control by passing a law before the law is created by the proposal.  “More control” means that they are able to amend a law they pass with a simple majority vote.  A ballot proposal created law can only be amended with a three-quarters vote of the legislature.  So there, you have it. It appears that the legislature passed two laws because they could maintain the ability to more easily amend those two laws at a later time.  The kicker is maintaining that ability might actually be a very smart move by the legislature.  We will just have to wait and see how this all plays out over the next couple of years.

Now, let’s get to the specifics of these laws.  Law One states that on January 1, 2019, the minimum wage will increase from $9.25 to $10.00 with further increases scheduled thru 2022 to bring the minimum wage up to $12.00.  Starting in 2023, increases will be controlled by the Consumers Price Index (CPI), similar to many other benefits such as social security. This is a continuation of a steady increase in the minimum wage that started back in September of 2014 when the rate was increased to $7.40.  Nothing is very controversial in this part of the package.  We will save all of that for Law Two.  Law Two is called the Earned Sick Time Act.  The general rule will be for each 30 hours of time worked, each employee will earn 1 hour of paid sick time.  Specifically, for employers with 10 or more employees, each employee will automatically receive 72 hours of paid sick time per year.  Each employee who uses up the paid 72 hours will then receive an additional 32 hours of unpaid sick time per year. For employers with under 10 employers, the earned sick time automatically received will be 40 hours.  The 32 hours of additional unpaid time apparently applies to all employers.  The definition of reasons employees can give to use the paid sick time and the unpaid sick time is expansive.  It includes reasons such as personal health, family health, domestic violence, sexual violence and disability issues.  All employers have until April 1, 2019 to provide an Earned Sick Time Policy to all employees. There will be a lot of publicity and explanation of these two bills in the coming few months.  Since every employer and, therefore, every employee is affected by these two bills, it seems likely that I will be passing along additional information on this issue in the future.

In the meantime, all of us in the Rockford and West Michigan community suffered a big loss with the passing of Paul Krupp. My condolences to Paul’s entire family and especially to his wife Nancy. Paul was a great guy who just did whatever he could to make our world a better place to live in.  He will be missed but we can all be glad that we had him in our presence for as long as we did.  This is Jerry Coon signing off.

Jerry Coon is an Enrolled Agent.

He owns Action Tax Service on Northland Dr in Rockford.

Contact Jerry at www.actiontaxservice.com.