Four ways the 2012 elections can impact the NY restaurant industry

Every four years, the general public gets inundated with political campaigns aimed at scaring us into voting for one candidate over another. It happens on both sides and leaves most voters confused and angry. In theory, we are supposed to receive facts that we can use to form our opinion instead of gross accusations and exaggerated statistics that leave us unable to discern fact from fiction.

There are a lot of issues at stake for the 2012 election, as the outcome will define the road the U.S. takes on these issues for at least the next four years. Four major issues should be of particular concern to restaurant owners:

Issue #1: Minimum wage increases. New York State matches the federal minimum wage requirement of $7.25. Tipped employees can be paid as little as $2.13 per hour, as long as tips plus wages adds up to at least $7.25. On the table right now is a proposal to raise the minimum wage to $8.50. Backed by Democratic Governor Andrew Cuomo, the bill passed the New York State Assembly in May, but has been brought to a standstill in the Republican-controlled Senate.

Many businesses argue that an increased minimum wage will require the company to cut hours or shifts or reduce the number of employees to accommodate the added cost, resulting in stifled growth. Others argue that when the minimum wage goes up, there is an overall wage inflation. Some businesses would try to transfer the cost to the customer, but most are already pushing the limit that consumers will bear.

Proponents of the bill, like The Center for American Progress, argue that higher minimum wages results in lower turnover and more productive workers. For anyone who has seen The Food Network’s Restaurant Stakeout, garnering the loyalty and longevity of employees can be a serious obstacle. If an increased minimum wage will help alleviate the problem, it may be worth the cost. Other supporters get straight to the point – higher wages means more income, more spending money, and the entire economy benefits.

Issue #2: American Jobs Act v. Jobs Through Growth Act. Each of these bills seeks to address obstacles to economic growth and prosperity, but they go about it in vastly different ways.

Iiiiiiin this corner: President Obama’s American Jobs Act, a bill with a $447-billion budget paid for by the President’s Long-Term Deficit Reduction Plan. The goal is to create jobs (equals more income, equals more consumer spending, equals better economy) without adding to the deficit – small, short-term achievements to tackle the troubled economy while the two parties remain unable to agree on long-term resolutions. A small part of the bill already passed, which offers tax credits to restaurant owners who hire U.S. veterans. There are still parts of the bill that, if passed, could benefit the restaurant industry, including: (1) cutting payroll taxes in half for 98% of businesses; (2) expanding SBA-backed loan limits; and (3) a tax credit to businesses that hire long-term unemployed workers.

Aaaaand in this corner: The Republican counter-proposal, the Jobs Through Growth Act, which aims to develop the private sector by reforming the tax code, cutting spending, and deregulating (“grow the economy, not the government”[1]). Supporters of this bill argue that it will have longer positive effects than the American Jobs Act. Parts of the bill that affect restaurant owners and employees include the creation of a simple, two-rate income tax, cutting corporate taxes to 25%, and lowering the tax for one year on foreign-earned profits repatriated by U.S. corporations to encourage capital back into the U.S. The bill would also curb overregulation by imposing a moratorium on regulations that would affect job growth until unemployment reaches 7.7% or lower and offers exemptions from certain regulations for small businesses. The bill also cuts the red tape on regulations that are argued to be artificially raising the price of gasoline and removes the current roadblocks to offshore energy development.

Issue #3: Business meal deductions. Before 1986, business meals were fully deductible. Since 1986, the business meal deduction dropped from 80% to 50 % in 1992. Democratic Representative Shelley Berkley has introduced H.R. 468, a bill that would raise the business meal deduction back to 80%. The National Restaurant Association estimates that this change would increase business meal sales by $7 billion and add 244,000 jobs. If this bill goes through, restaurant owners could turn parts of the restaurant into conference rooms to encourage larger corporate events for businesses lured by the tax incentive. Of course, cutting this tax means cutting federal revenue.

Issue #4: Immigration reform. Last year, undocumented restaurant workers were estimated at over 700,000 of the 12.8 million employees in the restaurant industry. The federal government hasn’t been able to reach an agreement on immigration reform. Also last year, President Obama reversed the immigration tactic of the past (go after undocumented employees) by holding employers responsible for hiring undocumented workers. The 2011 raid on Chipotle by the Immigration and Customs Enforcement agency (ICE) is an example of this new approach. Lack of consistency in federal immigration reform has forced individual states to create their own policies. Four states (Alabama, Arizona, Mississippi, and South Carolina) have all passed bills requiring restaurant owners to use E-verify for new hires. The process is time-consuming and has led to a higher turnover rate. New York restaurant owners will want to pay attention to immigration reform that will impact their business practices.

So, where do you go from here? The purpose of this article is to present clear-cut arguments from both sides so that you, being the free-thinking individual that you are, can make your own informed opinion. Armed with the weapon that governments fear most – knowledge – you can decide which candidate best supports your needs. Hey, this reminds me of something I once read about a thing called “democracy…”

As November 6th creeps closer, I encourage you to take some time to read up on the candidates and where they sit on these issues. Regardless of the outcome of these elections, your political awareness will help you adapt to whatever changes may come.