June 23, 2003
Legislative session ends; highlight is defeat of tax hikes in 'New Jersey Plan'
The 2003 legislative session ended Friday, June 20, without definitive action on a host of issues of interest to New York's business community. The Senate ceased deliberations just before dawn June 20; the Assembly wrapped up its business that afternoon.
The 2003 session was highlighted by the successful efforts of The Business Council to kill a controversial proposal to enact sweeping increases in corporate taxes. The "New Jersey Plan," as it was dubbed by The Business Council, was modeled on a series of tax increases implemented by New Jersey in 2002. Those increases had immediate, negative economic effects in the Garden State.
Although lawmakers did enact other tax increases this year despite Council opposition, they did not delay tax reductions that were scheduled to take effect this year, and those reductions will move forward on schedule. These tax cuts, which will return an estimated $177 million to taxpayers, include a continuing reduction in the gross receipts tax on energy, an increase in the earned-income tax credit, a reduction in the marriage penalty, and a reduction in the tax rate for some small businesses.
The New Jersey Plan was defeated despite multi-million-dollar lobbying and advertising campaigns undertaken by public-employee unions and others that would directly benefit from increased government spending.
The New Jersey Plan includes proposals to create:
- A new alternative minimum tax that would have forced companies to pay taxes even if profits shrank or evaporated altogether.
- Worldwide combination reporting, which would have required companies to pay New York State taxes on income that they or their subsidiaries legitimately earned in other states or nations.
Although they rejected the short-sighted proposal to increase business taxes, state lawmakers did increase other taxes substantially despite strong Council opposition. Lawmakers increased the state's sales tax one-quarter of one percent, and they raised the personal income tax on New York's highest-income earners. They raised these taxes to increase state spending by $1.3 billion despite the Governor's warnings that the higher taxes could cost the state jobs.
After Legislators overrode the Governor's vetoes of their additional spending in mid-May, the Legislature continued discussing a range of issues of importance to business, but there were final resolutions on few of them.
Superfund/brownfields: Lawmakers apparently reached a three-way agreement on a Superfund refinancing/brownfield reform bill that The Council and many of its members have characterized as "generally disappointing," said Ken Pokalsky, director of environmental and economic development programs.
There were minor differences in the bills passed by the Senate and the Assembly. Senate Majority Leader Joseph Bruno said the Senate would not return to Albany to vote on an agreed-upon bill before September.
Pokalsky said the Superfund/brownfields bill would:
- Significantly increase both costs and liability exposure for manufacturers and other businesses. The bill calls for new fees on businesses of $20 million a year.
- Add new procedural requirements, impose new demands on project sponsors, and add many other program requirements that would impede future voluntary cleanup projects.
- Create ambiguous provisions regarding cleanup of surface soil and ground waterwhich could lead to project delays, significant cost increases, and potential litigation.
- Create a new a groundwater protection and remediation program that will affect all state cleanup programs: Superfund sites, brownfields, and oil-spill sites. The state Department of Environmental Conservation (DEC) would get new authority to bring enforcement actions against "known or suspected" responsible parties within six months of determining that voluntary cleanup sites pose a significant environmental threat.
- Create, in the brownfield plan, new tax incentives to encourage redevelopment of these sites, and liability releases that apply to oil-spill sites as well as hazardous-waste sites.
Vicarious liability: The Council favors repeal of the state's unique "vicarious liability" law or a compromise that would ease leasing companies' liability burden. The Senate has voted to repeal vicarious liability, but there was no movement on this issue. Vicarious liability forces companies that lease cars to assume liability for unlimited monetary damages if the cars are in accidents, even if the company is in no way at fault.
'Mental health parity': After strong Council opposition to this costly new health-insurance mandate, the proposal lost momentum. The Assembly passed a mental health parity bill, but the Senate did not pass its companion. This proposal, which would require expanded health-insurance coverage for mental illness and substance abuse, would make basic health-insurance coverage too costly for an estimated 90,000 New Yorkers.
'Corporate accountability' bills: The Legislature took no action on six different bills proposed by state Attorney General Eliot Spitzer as "corporate accountability" bills. The Council has argued that the federal government has addressed concerns in this area with the bipartisan Sarbanes-Oxley Act.
Power-plant siting: The Legislature took no action to reauthorize the state's expired Article X siting law, which governs how the state sites new electricity-generating plants. No final action on this issue is expected soon.
Workers' comp reform: No major action to reform workers' comp is expected before next year, an election year, when the debate is likely to focus on cost-cutting reforms and the possibility of an increase in benefits.
Smoking law reform: The Legislature took no action to modify a new anti-smoking law that severely penalizes businesses that invested in work areas that could accommodate smokers. The new state anti-smoking law prohibits smoking in any workplace that has any workers, with no consideration to many factories, restaurants, and businesses that have invested heavily in creating facilities that could accommodate smokers. The Council supports a bill (A.8601-Abbate) to would permit smoking in such indoor workplace areas.
Divisible load permits: The Assembly adjourned without passing a bill (S.2974A-Kuhl/A.677A-Gantt) that would increase, from 17,000 to 25,000, the number of special permits available for trucks carrying weight in excess of what is normally allowed on the state highway. The Senate has passed the bill, which The Council supports because construction, logging, agriculture, and other shipping industries rely on the trucking of heavy loads.
Expanded "whistleblower" law: Neither house passed a new "whistleblower" bill (S.4813-A-Vellella/A.4813-A-John) which The Council believes would unreasonably broaden the range of workplace disputes in which employees may refuse to perform their job duties and seek "whistleblower" protections. The bill would expand legal protection to employees from cases in which employees see actual employer violations to cases in which the employees "reasonably believe" an activity is or will be illegal.
Retail divorcement of gasoline stations: The Assembly adjourned without passed a bill that would limit the rights of petroleum refiners and producers to directly operate service stations they own and build. The Senate passed the bill despite opposition from The Council, which opposes the bill because it would unfairly restrict refiner- and producer-owned stations but not those operated by others. This would ultimately hurt consumers because robust and unfettered competition is the best way to improve service and contain prices.