Question 4 is a bad idea for many reasons. I find it highly unlikely that the individuals who gathered signatures to get this job killing proposition on the ballot in November had an inkling of the damage this referendum would cause and the economic distress it will place on restaurants in Maine, from Kittery to Caribou and everywhere in between.
Besides my personal opinion that business owners, not government should set wages, I find it very distasteful that the same group of individuals who pushed this initiative, the Maine People’s Alliance, do not pay their own employees what they deem a “fair wage.” They also use aliases such as the Maine Small Business Coalition, which is just another arm of their leftist agenda that’s funded by the same people. These individuals have most likely never run a restaurant and have little to no understanding of the detrimental effects this will have on our economy.
Restaurant employers are required to pay taxes on the tips their employees collect from patrons, as the tips are considered income under the Federal Insurance Contribution Act (FICA). There’s an incentive to accurately report their workers’ tip earnings: an income tax credit called the FICA tip credit which can potentially save restaurants hundreds of dollars per employee, sometimes more.
The Fair Labor Standards Act allows restaurant employers to include the tips their employees earn toward meeting the minimum wage requirements. If the tip amount exceeds the federal minimum requirement, restaurant employers may be eligible for a partial tax credit. This credit equals the employer’s portion of the FICA tax, which is currently 7.65 percent, multiplied by the tips in excess of the federal minimum wage.
Question 4 removes this option for restaurant owners large and small alike, thus increasing the cost of business two fold – once by removing the option of the tax credits and second by raising the hourly wage for all servers incrementally over the next 4 years and then indexed for inflation after that annually. What this boils down to for most servers is about $13.50 per hour in the end, far less than the average server earns now, and an increase in costs for all restaurants owners.
The Maine Tourism Association, Maine Inkeepers Association, Mid Maine Chamber of Commerce, Maine Grocers and Wholesale Food Distribution Association and many others are concerned about this referendum and have voiced their opposition. An ethics report reveals that there has been opposition to this measure, and I estimate after the filing deadline of September 27th pre-general election reports even more business owners will step up to help stop this measure from becoming law.
When the cost of a product, in this case human capital, elevates to a level where the cost outweighs the value of the capital, there are three choices; cut the waste, increase costs to the consumers, or close your business here and go to a friendlier state. All three options have the end result of hurting those who the minimum wage is proposed to help, the poorest workers.
Simply put, this referendum is a job killer.