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Bill proposed to bring relief to small businesses struggling under stiff wage mandates

The state Senate Finance and Commerce Committee on Monday passed SB 1213, a bill that advocates say will help small businesses in communities with sky-high wage mandates by establishing a tax credit for employers to offset their higher labor costs. The credit would be funded by the state withholding a portion of the city or town’s state shared revenues. 

Sponsored by state Sen. Wendy Rogers, R-Flagstaff, the bill passed on a 4-3 party line vote. 

“This holds a city to some extent accountable for its decision to have a higher minimum wage than the state,” Rogers said. 

The statewide minimum wage is $14.35 per hour, but in Flagstaff the minimum wage is $17.40 per hour. 

She explained that her legislation simply extends to the employer a 5% tax credit on the difference between their wage bill and what it would have been in a city that follows the state minimum wage. The amount of shared revenues that could be withheld from a city would be capped at $5 million annually. 

Joe Galli, who oversees public affairs for the Greater Flagstaff ϳԹ of Commerce, said the impact of the city’s higher minimum wage on businesses in his community has been significant. 

“Imagine a Flagstaff business with payroll costs of $1 million a year. That same business in any other city would have payroll costs of $700,000,” he said. “This bill is an opportunity for the citizens of Flagstaff who have chosen a higher wage mandate than the state wage mandate to reinvest back in the job creators they’ve penalized. This bill levels the playing field, and it allows businesses to reinvest the credit back into the local economy.” 

State Senate Minority Leader Mitzi Epstein, D-Ahwatukee, voted against the bill, arguing that businesses “could find some of the cost savings in some of their highly inflated C-level jobs to help pay.” She called the bill an “insult to voters.” 

The Census Bureau says the median household income in Flagstaff is $65,652. 

Labor unions registered their opposition to the bill, arguing that prevailing wage ordinances they support in Phoenix in Tucson result in wage mandates higher than the state minimum wage. 

Under prevailing wage ordinances, labor rates for public works projects are pegged to rates set by the Department of Labor rather than between the client, contractor, and subcontractors. 

The Phoenix and Tucson measures are the subject of a lawsuit filed last month. Opponents argue that the state constitution bars municipalities from adopting such ordinances. 

Tucson is phasing in its own local minimum wage mandate. That city will adopt a $15 hourly rate beginning January 1, 2015. 

Joining the Flagstaff ϳԹ in support of establishing the tax credit were the Arizona ϳԹ of Commerce & Industry, the Greater Phoenix ϳԹ, and the West Valley ϳԹ of Commerce Alliance.

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