Reliability in state policies and regulations is a significant priority for any business, but especially so in Massachusetts, with an active Democratic Legislature that is historically interested in effecting social change. Changes in taxation or employment regulations can have a significant impact on the future of business investment in the Commonwealth.
The tension between the business-friendly House of Representatives and more liberal Senate in the last legislative session resulted in a number of last-minute deals on items of interest to the business community, including an expanded renewable energy bill, a bill intended to help stimulate economic development, and regulation of ride-for-hire services like Uber and Lyft.
As we look toward a new legislative session, there are a number of items on the horizon that will significantly affect the business community and its bottom line. In planning for 2017, it is important that all businesses take the following issues into account.
- Taxation/Millionaire Tax – Proposed as a ballot question for the 2018 election cycle, the so-called “Millionaire Tax” would amend the Commonwealth’s Constitution to allow higher taxes on any personal earnings above one million dollars in a calendar year. With funds earmarked for the areas of transportation and education, the ballot question is the first maneuver in many years that proposes to raise income taxes, and comes at a time when the state continues to see slow revenue growth with faster-growing spending needs. While both the House and Senate leadership has maintained a line of “no new taxes” in past legislative cycles, this dedication to such policies has begun to soften. As the gap in available financial resources continues to grow, companies should monitor the issue of taxation closely for potential change.
- Employment Covenants – Commonly referred to as “non-competition agreements,” employment covenants are one restriction used to inhibit the flow of intellectual property or market share. In some cases, employers attempt to protect their customer base by prohibiting employees from working in the same industry or geographical area. In other cases, employers are seeking to protect their significant investment in R&D or other intellectual property. Both House and Senate passed their own versions of this bill, with inclusion of Uniform Trade Secrets Act language in each. As an issue that has attracted support on both sides, there will be a continued interest in clarifying the use of such agreements in the next session, with expected limitations on the employer side.
- Paid Family and Medical Leave – A key Senate initiative in this past session, this measure was not considered by the House when sent to that body at the end of July. Intended to assist employees in times of significant change, the bill would allow eligible employees up to 16 weeks of paid job-protected leave in the case of significant illness or injury, or up to 26 weeks to care for a seriously ill family member or a newborn child. The program would create a new Family and Employment Security Trust Fund that would be administered by a new Division of Family and Medical Leave in the Executive Office of Labor and Workforce Development. Employer contributions to the Fund would finance the paid leave, although an employer could require employees to pay up to 50 percent of the contribution. As this issue gains momentum nationally, Massachusetts will likely try to lead the way in finding a balance between employers and employees.
- Climate change – An Executive Order issued by Governor Charlie Baker in mid-September requires state agencies to look closely at climate change, with new targets for greenhouse emissions and a plan that begins to address the outcomes of climate change. Businesses can expect to see increasing municipal attention on their so-called “carbon footprint,” with perhaps new targets regarding municipal waste, recycling, energy efficiency and climate preparedness. It is currently unclear what form this effort will take in the Legislature for the next session, but climate change will continue to be a significant issue.
- Energy – While the Legislature did pass a measure dealing with renewable energy in the last session, there are already signs that more work will be needed, especially in the area of solar energy. The planned shutdown of the Pilgrim Nuclear Power Station in 2019 will enhance the need for additional energy sources to replace that capacity. In addition, the discussion of alternatives such as hydropower and wind power have not been fully exhausted.
- Transportation – As the state continues to invest in recruitment of new businesses, adequate transportation and transit for workers continues to be a theme. State investment in transportation has been a touchy subject in recent years, with questions of reliability, sustainability and expansion overlaid by the significant funding amounts needed to ensure all three. A 2016 fare increase did not go far enough to meet the needs of an aging public transportation system – expect that the funding gap as well as adequate future planning will continue to be a discussion in the new legislative session.
- Airbnb/Emerging Technology – This past session, call for proper laws and regulation of “emerging technology” became more prevalent. One such issue is the regulation of short-term rentals, such as Airbnb. Currently, lodging rented through web-based applications does not fall under the same public safety and health restrictions as conventional hotel and motel rooms. Nor are they taxed at the same level as other forms of short-term lodging, which means a significant loss of potential revenue for the state and host cities and towns. A measure passed out of the Senate would have regulated the taxation of these short-term rentals without addressing public health and safety regulations. While the House did not take up the Senate bill, Speaker DeLeo has stated his intention to address this issue early in 2017. This issue is of interest to those monitoring the state’s treatment of emerging technology, as well as those who are interested in the long-term availability of transient accommodation in the Commonwealth.
A number of measures passed this last session are in the process of full implementation, and will significantly affect Massachusetts businesses, such as the implementation of an equal gender pay act and a planned January 1, 2017 increase in the minimum wage to $11.00 per hour.
Finally, the 2017-2018 legislative session leads up to the next gubernatorial election in November 2018. Governor Charlie Baker is expected to run for re-election and will be looking for opportunities to prove his worth to the voters. Many hot-button issues remain out of his direct control, such as inadequacies in the transportation system and stagnant revenues, both of which are two areas that can quickly become a headache during a statewide campaign. While he has not been in favor of increased taxation, he may be amenable to regulatory or other changes that could affect businesses’ bottom line.
Close monitoring of state policies and legislative efforts will ensure that your voice is heard at the correct time.
Lindsay Toghill is a vice president in O’Neill and Associates’ government relations practice. To learn more about her or our services, click here.