Exempting Overtime Pay from State Income Taxes

2023 Ideas Challenge Entry

Alabama Representative Anthony Daniels is leading the way to enhance workforce participation, grow the state’s economy, and help hard-working families hold onto more of their hard-earned income. His innovative new law, passed this year with strong bipartisan support, exempts from income taxation any hours worked beyond 40 hours per week by hourly waged employees. Exempting the 5% state income tax on time-and-a-half pay helps struggling families, businesses dealing with labor issues, and will help stimulate local economies.

 

The measure empowers workers in all sectors (agriculture, law enforcement, service industries, etc.) to pursue overtime as an avenue to advancement and economic prosperity. The law also includes all sectors and businesses. Furthermore, it does not require employees to work overtime hours if they choose not to, nor does it alter the implementation of the Fair Labor Standards Act or change who is a full-time employee or a part-time employee.

 

Impact:

With no state minimum wage, Alabama workers have not seen a minimum wage increase in nearly 15 years and continue to earn $7.25 an hour. The overtime tax exemption is a step to help many deal with rising prices and costs. The law is effectively a one-year pilot program for 2024. Its success will be tracked through data collection. Employers, both public and private, will report to the Alabama Department of Revenue the amount of overtime paid to full-time hourly employees and the number of employees who received that pay. The program will identify through the analysis of aggregate data, the following:

 – Increased spending, or “replacement spending,” including at local businesses, by workers receiving income-tax-exempted overtime compensation.

 – Increased workforce participation in Alabama’s overall labor force participation rate, the proportion of the working-age population that is either working or actively looking for work, is 56.9%.

Small Business Wage Boost

2023 Ideas Challenge Entry

Scranton Mayor Paige Cognetti’s Small Business Wage Boost program is an employee retention program designed to address the gap between the current working wage and a livable wage, funded by the American Rescue Plan Act (ARPA). Small businesses throughout the City of Scranton can apply for up to $50,000, disbursed over two years, to raise their employees’ wages closer to the state average.

In the program’s first year, Scranton used ARPA funding to fully fund the gap between the current wage and elevated wage. In year two, the City and business will share the responsibility of funding the higher wage. By the third year, the goal is for businesses to fully support their employees’ new wages. The Wage Boost program is an innovative approach to address a minimum wage in Pennsylvania that lags behind the needs of 21st century workers. By helping small businesses raise employees’ wages, it’s a win-win-win for the city: businesses can retain employees who might leave for other better paying jobs, employees can keep up with the cost of living, and the city retains tax-paying businesses.

Impact:

The program was announced to the community in October 2022. Across two rounds of funding announcements, nine businesses have received between $25,000 and $50,000 in wage boost grants to be used over the course of the next two years. A third round of applications opens late summer 2023. The program’s impact is seen in the potential economic mobility of the employees receiving higher wages, a reduction in turnover for employers, and the ongoing success of the businesses that have tapped into the program.

Paid Family and Medical Leave Policy for Maine

2023 Ideas Challenge Entry

The Guaranteed Paid Family Leave plan, sponsored by Maine Representative Kristen Cloutier, will provide up to 12 weeks of paid leave per year to all eligible employees in the private and public sector. The plan permits employees to take leave to care for any individual with whom they have a significant personal bond that is or is like a family relationship regardless of biological or legal relationship. Employees can take paid leave immediately after starting employment.

Paid family and medical leave will help Maine workers, particularly working women, meet their personal and family health care needs, while also fulfilling work responsibilities. To pay for this program while keeping track of who gets helped, the state will impose a 1% contribution rate, split evenly between the employer and employee.

Impact:

The state of Maine will keep track of how the program is affecting businesses and whether they are adapting well to implementation of the program over time. Additionally, Cloutier built in strong accountability provisions to monitor the sustainability of the fund and allows for the contribution rates to be adjusted as necessary.

Maryland’s New Start Act

2023 Ideas Challenge Entry

Previously justice-involved citizens often find themselves without work or opportunities upon their reentry. Even fewer are able to go on to become small business owners or entrepreneurs. The New Start Act, introduced by Maryland Delegate Jazz Lewis, provides grant money to train returning citizens to be small business owners and with seed money to start their small businesses.

 

Impact:

Approved in 2022, the program has started accepting applications from nonprofits looking to provide training for returning citizens who would like to be small business owners. Graduates from the program are able to apply for funding for their business ideas so that they can turn their ideas into functioning and operating businesses. Success will be measured by looking at the graduates who go on to be entrepreneurial small business owners who move on with their lives to be active participants in their local economy.

Mayor Ron Nirenburg: A Model Job-Training Program

This week, Labor Secretary Marty Walsh visited San Antonio, where he praised NewDEALer Mayor Ron Nirenberg’s Ready to Work program. The $200 million program has a goal to train 28,000 low-income residents for better paying jobs by the end of 2025. The program formally launched in May, and so far nearly 6,000 people have applied. During his visit, Secretary Walsh said “We need to be more intentional about investing in workforce development, and we need to be doing it with cities…Programs like Ready to Work should be replicated around the country.” Read more about the program here, and also check out the Labor Department’s Good Jobs Initiative, which is seeking to improve job quality nationwide.

Mayor Luke Bronin: New Funding for Hartford Youth Program

On Tuesday, NewDEAL Leader Hartford Mayor Luke Bronin announced hundreds of thousands of dollars in additional funding for the city’s Summer Youth Employment and Learning program. The program, which works to connect the city’s youth with paid summer jobs, reaches about 800 young people each year. The funding boost will allow the city to expand the program in response to rising workforce needs. “The Summer Youth Employment and Learning Program gives young people a really important opportunity to earn a paycheck, build skills and work experience, and get connected to mentors and a network of support,” Bronin said. Bronin has long been a champion of youth engagement, spearheading the creation of Hartford’s award-winning Youth Service Corps early in his first term as mayor. He discussed the Youth Service Corps at NewDEAL’s 2023 Ideas Summit in Detroit. See the highlights here.

Mayor Leirion Gaylor Baird: New Plan to Boost Local Food System in Lincoln

This week, NewDEAL Leader Lincoln Mayor Leirion Gaylor Baird unveiled Lincoln’s Local Food System Plan, a thorough effort to support local producers, increase equitable access to high-quality food, and reduce food waste. The plan, developed by a 10-member community committee, hopes to double the acres where local food is grown in the Lincoln area and triple the number of community gardens by 2035. “Lincoln’s new Local Food System Plan will position our community to reap the benefits of a thriving local food system — supporting local farmers, expanding markets, creating jobs, increasing food security, improving health outcomes, reducing carbon emissions and instilling a sense of pride in our community,” Gaylor Baird said. Read more about the plan here.

Columbus Small Business Growth Initiative

Problem

Many economically disadvantaged neighborhoods are home to entrepreneurs who have the time and energy to help turn their neighborhoods around, but who don’t have access to funding.

Solution

Councilmember Klein convened a group of small business owners, the local Chamber of Commerce, and local non-profits to determine which investments would make the most impact to revitalize disadvantaged neighborhoods and then designed a set of grants and loans to fund streetscape and building improvements, as well as start-up loans to create new jobs.

Bringing TOD and Innovation Business Districts Together

Problem

In order to make Denver a world-class city, Mayor Michael Hancock is striving to evolve the definition of Transit Oriented Development to an idea of developing transit communities that are walkable, livable places that provide citizens with access to most of their daily needs.

Solution

As Denver continues to develop its mass transit system, Mayor Hancock is also looking to leverage the great redevelopment opportunities around station areas, increasing job and business and changing the mix of traditional uses in these development, thus transforming formerly disinvested neighborhoods. By bringing together the ideas of transit oriented development and innovation business districts, Mayor Hancock is working to create an exceptional transit system with great stations that connect to walkable communities.

Innovation Vouchers

Problem

Small businesses often do not have the resources to harness expertise in research and development. Meanwhile, scientific, technological and other research facilities are often looking for new projects. Funding the linkage between these two groups would lead to new opportunities for economic growth.

Solution

Assemblymember Buchwald is proposing to issue “Innovation Vouchers” to small businesses to acquire expertise from universities, national laboratories, or public research institutes. The goal of the program would be to connect research facilities to small businesses, helping create jobs and spur innovation.

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