Originally posted – Feb 20, 2014
Joe Crosby is a senior vice president and principal at MultiState Associates, which provides ongoing legislative monitoring and lobbying assistance to the Coin Laundry Association. Prior to joining MultiState, Crosby spent 11 years with the Council on State Taxation (COST), an association representing 600 of the nation’s largest companies on state and local business tax issues. He served COST as chief operating officer and senior director, policy. In addition to his operational responsibilities, Crosby managed all aspects of COST’s advocacy program and regularly testified before state legislatures and other state and national policy-making bodies. He is a nationally recognized expert on state and local business tax policy.
Mr. Crosby will be speaking at the Coin Laundry Association’s Excellence in Laundry Conference, which is scheduled for May 14-15 at the Ocean Reef Club in Key Largo, Fla.
Last year was certainly a busy one for the self-service laundry industry, with regard to battles to maintain our sales tax exemptions in many states. Why such a flurry of activity in 2013?
There was a flurry of activity last year because of the interesting results we had in the 2012 midterm elections – not at the Congressional level, but at the state level.
We came out of those elections with the greatest partisan alignment the country has seen in modern history. Of the 50 states, 46 were either all Democrats or all Republicans. And, if you look deeper into it, what you found in almost all circumstances is that the blue states got bluer and the red states got redder. It created an environment for bold proposals, and that’s what we experienced.
On the Republican side, we saw in a number of states proposals that were organized around expanding the sales tax base, and reducing or eliminating personal or corporate income taxes.
There was similar activity on the Democratic side – in Minnesota, for example. However, there the idea wasn’t to reduce the income tax rate but rather to increase revenues overall.
Of course, in all of the states where these plans were initially proposed, the original proposals were either significantly modified or rejected. However, in a nutshell, I think that explains why we saw what we saw in 2013.
There also was a significant political element to this activity, particularly on the Republican side, in that a number of those governors have aspirations for higher office. Introducing proposals such as those that we saw are ways to burnish their conservative records.
As you mentioned, the industry was successful in turning back those legislative attacks in every instance. In your opinion, why were laundry owners so successful in these clashes with state and local municipalities?
That’s a really important question. When this sort of activity occurs, you need to go back, after the fact – and, whether or not you were successful, you need to ask why.
Superficially, if you’re not deeply involved with politics, you could easily say that the laundry industry was successful because the proposed packages just fell apart. And, yes, certainly there is an element of that – the fact that the broader proposals themselves lost steam was an important factor.
But, if you were involved with it like the Coin Laundry Association was, what you know is that in some of these states the CLA preserved the coin laundries’ sales tax exemptions even before the packages fell apart. What that means, which is critical, is that – even had the packages gone forward – the coin laundry exemptions would have remained the same.
Why was the CLA successful? First of all, the industry organized quickly. The CLA was very effective in going to those states, organizing local owners to identify and retain counsel within the states that could assist in the advocacy efforts and carry the banner for the industry.
A lot of what is done in the political realm is driven by who shows up. And the laundry industry showed up. By showing up, you get your voice heard.
On the substantive side, the industry has a great story to tell, as far as why it is appropriate to exempt coin laundry services from taxation. Those reasons are powerful, in that they speak to both conservative and liberal principles.
For example, regarding the conservative principle of not engaging in double taxation, self-service laundry owners are already paying sales taxes on the equipment they buy, as well as on the electricity and water they use. Also, in many ways, it is a self-provided service; if you put a sales tax on it, you’re essentially taxing people for working for themselves.
On the liberal side of the spectrum, there also are solid reasons for laundries to remain exempt – such as the fact that it’s clearly a regressive tax because the users of coin laundries tend to be toward the lower economic strata. Plus, the coin laundry industry clearly provides a public health benefit. So, there are a number of reasons from a liberal perspective, too.
If not in a unique position, the coin laundry industry is in the unusual position of having solid, defensible arguments that appeal to both sides of the political spectrum.
What can laundry owners do on a personal level to ensure that they maintain their sales tax exemptions?
What I saw last year in being involved with the CLA in many of these fights were individual laundry owners coming together quickly, getting organized, participating in meetings sponsored or facilitated by the CLA and its state chapters, and turning out to talk with the political experts who were brought in to help them understand the situation and understand how they could make an impact. In addition, many of them reached out individually to legislators and contributed to the fight.
There is nothing more powerful in politics than when someone has an interest that is sufficiently important that they’re willing to put their time and their financial resources behind it. In writing a check to a local CLA affiliate and helping it offset the cost of having a lobbyist represent the laundry industry in their state, those individual owners are sending a powerful message to legislators that this issue really matters to them.
Do you anticipate a similar amount of sales tax activity aimed at the self-service laundry industry again in 2014?
I think 2014 is going to be an interesting year. Of course, we have a major midterm election coming up. In fact, 36 governors are up for election this year, as well as more than half of the state legislators.
Typically, election years are quieter, and I expect that to be the case this year. There will be some tax activity. It won’t be anything nearly as broad-based as what we dealt with last year, but we are starting to see some tax reform proposals. I think there will be very few controversial tax discussions between now and November.
With that said, there is no better time to raise taxes then right after an election; it gives legislators the most amount of time to hope that the voters will forget about it.
As we go forward in the longer term, especially in the more conservative states, there is an interest in moving more toward consumption-based taxation and away from income-based taxation. And, as long as those discussions continue, the coin laundry industry will have to remain vigilant.
The minimum wage has been getting a lot of press lately. A number of states raised their minimum wages on January 1, and President Obama has discussed raising the national minimum. What can laundry owners expect, regarding this issue?
I just returned from a meeting of the Council of State Chambers of Commerce, and this was a major topic. About 30 states are dealing with active minimum wage campaigns right now – either at the state or local level.
I think we will see quite a number of states act to raise the minimum wage. In fact, the question is not whether it will happen, but to what extent it will happen. Are we looking at graduated, reasonable increases or shocking increases? For example, in Washington, they’re talking about going to $15 an hour, which would be impossible for many, if not most, small-business owners to deal with.
There is going to be a significant amount of action on this issue this year. Again, part of that is political – labor unions and Democrats identify this issue as an issue that has a lot of public support and, from talking to many business leaders, the polling is not on the side of those who oppose minimum wage hikes in any form.
This issue tends to serve as a way to get Democratic voters out to the polls. I think we’re going to see any effort to put this on the ballot in some states.
With the broader business perspective, although the principles are still being developed, the idea would be that it’s better to do it at the highest level of government. And, if it’s going to happen, it should happen in a gradual way and perhaps should incorporate some alternative to allow younger and entry-level workers to enter into the workplace on a training wage or something similar.
In many markets, the laundry industry relies on a large percentage of immigrants – both as customers and employees. What is the latest on immigration reform policy, and what can store owners expect in 2014 and beyond?
That was another hot topic of conversation at the State Chambers meeting I just attended. Of course, we saw a flurry of state legislative activity several years ago, related to immigration. But almost all of that activity – however well-intentioned – posed significant problems for the business community.
Statewide business organizations have been calling for the federal government to address this issue. Unfortunately, I am not at all convinced that the federal government will act on it this year. House Speaker Boehner recently indicated that, although the House Republicans developed a set of principles for dealing with the immigration issue, he had significant concerns that the Obama administration would not faithfully enforce whatever law they might pass.
Whether that is a way to avoid doing something or a truthfully held concern – and I think it’s probably a combination of the two – it indicates to me that the House Republicans are not ready to act on immigration.
I don’t see a lot of state-level activity because I think statewide business organizations have done a good job over the past couple of year in the wake of what happened in Arizona of preparing and educating their elected officials on why this is not an area where the states can be meaningful effective leaders.
I think we’re probably going to end this year exactly where we are now, which is in a muddled, uncertain place. Hopefully, post-election, we can get some clarity and action.
With the mid-term elections this year, what other key legislative issues of importance to laundry owners and other small-business operators seem to be heating up?
There are a couple of issues that cross the state and federal divide, and one of them certainly is healthcare. There is the issue of Medicaid expansion, which should be of interest to laundry owners from both their employees’ and customers’ perspectives, because many of these individuals are relatively low-wage workers. About half of the states expanded their Medicaid programs, while the other half – primarily Republican states – have not. That’s going to continue to be a big issue.
More broadly, another big issue will be the rollout of the Affordable Care Act. For some of the multi-store owners who have larger operations and are affected, whether or not they are above the 50-employee level, it certainly will be an interesting year regarding the cost of healthcare.
In general, which current regulatory issues should self-service laundry owners pay particular attention to in 2014?
At the state level, I see some positive trends, particularly in the Republican states, where there is an interest in creating and growing what is called the Office of the Repealer. This is a sort of regulatory review process, where states can limit regulation that appears to be unnecessary or harmful to capital investment in that state.
So, there is some positive new there, but it’s limited mainly to states that are more conservative.
Overall, which state legislatures do you think have done the best on behalf of small business during the last few sessions?
That’s a challenging question. It depends on what you mean by a “small business.” Let’s just look at the tax activity we saw last year, with regard to the coin laundry industry. If those plans had moved forward as proposed, many stores would have lost their exemptions, which would have directly affected the owners’ bottom lines and/or required them to reform how they operated.
However, those very same plans would have helped other small businesses by reducing the personal income tax rate. In many ways, that was the actual goal of those proposals – to help small businesses, with the idea being that, overall, a consumption tax is borne by the consumers of the service or the good. This way, the business owner or job creator can shore up his or her earnings and invest in the business, thus creating even more jobs.
So, there is always that kind of double-edged sword.
But, all in all, I would say that, when you look particularly at some of the Southern and Midwestern states, they seem to be truly focused on helping small business. I’d identify Indiana, Kansas, North Carolina and Florida among the handful of states that are certainly nearer to the top in trying to improve things for small businesses. For example, Indiana Governor Mike Pence is currently proposing to eliminate all personal property taxes on businesses.
By contrast, what states have done the worst job for small-business owners?
California comes to mind, just because small business is not on the radar in that state. There are continued efforts in California to eliminate or reduce business incentives and to increase regulatory burden.
Some other states that have shown some antipathy toward smaller businesses are Illinois, Massachusetts and Minnesota.
What are the best resources available to laundry owners to help them stay abreast of any current legislation that may impact their businesses?
The first place to turn is the CLA and its state affiliates. Obviously, the CLA is following legislation that will impact the self-service laundry industry. Laundry owners would do well to stay abreast of what the CLA puts out; be sure to read the publications and attend the state chapter meetings.
Secondarily, keep up with the reporters who are following legislative activity in your State House. Most major newspapers will have reporters specifically assigned to the State House beat. If you’re technologically savvy, sign up for their Twitter feeds or bookmark their pages on the papers’ websites.
You can gain a lot of context by reading these reporters’ work. Although each state legislature has its own website, you can spend an awful lot of time on those sites without finding anything pertinent to the legislation the affects you. So, I’d look first to the reporters – they are the experts who are helping filter and frame those legislative discussions.
So, for industry-specific activity, turn to the CLA. For the general political beat, I would look to those reporters who are covering it.
It’s easy for some to become apathetic with regard to politics and legislation. What would you say to laundry owners who may be feeling that there is no way they can make a difference on their local legislative landscape?
I’ve been in politics now for more than 20 years, and the one thing that has proven true to me time and time again is that politicians really do value and care about constituent response.
I was engaged in a tax reform effort in North Carolina a few years ago, where we were trying to correct some egregious practices in which their Department of Revenue was engaged. And, during the hearing, the sponsor of the tax-reform proposal produced two letters he received from constituents. I knew of hundreds of businesses that were concerned about this issue, but only two of them took time to write him a letter – and he could not have been happier to have those letters to produce and to be able to say, “We’re doing this because these companies that are in my district care about this issue.”
If you do engage in the process, I guarantee you will get results and you will get positive feedback. Take the time to learn who your local legislator is; and, if something comes up that you’re concerned with, let him or her know.
What’s even more effective is to take the time once a year or even every other year to send a letter or give them a call – just explain the type of business you run in their district, list any concerns you may have and thank them for their support of small business. It doesn’t have to be a long letter, but it will make a difference, and you will get a response.
What one thing would you like the laundry owners reading this to take away from this interview?
The most important lesson is that there is power in organizing. As the CLA and its members showed last year, when an industry comes together and acts decisively, it can have an impact on the process.
Don’t think that getting involved is going to be difficult or ineffective – neither one is the case. Get involved.
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