Raises the minimum wage to $7 effective 1/1/06 and $8 on 1/1/08. Increases the hourly wage tip allowance from 25 cents to 75 cents effective 1/1/06. Provides temporary tax relief to employers by lowering the maximum taxable wage base for calendar years 2005 through 2007. (SD1)

A BILL FOR AN ACT

PART I

SECTION 1. The legislature finds that a job should be a bridge out of poverty, an opportunity to make a living from work. But for minimum wage workers, especially those with families, it is not. The inflation-adjusted value of the minimum wage is twenty-four per cent lower today than it was in 1979 in real dollars. If the wage had just kept pace with inflation since 1968, when it was $1.60 an hour, the minimum wage would have been $8.46 an hour in 2003.

Nationally, about three and a half million workers worked full-time and year-round in 1999, yet they and their families lived in poverty. A 2001 United States Conference of Mayors study found that thirty-seven per cent of adults seeking emergency food aid were employed. Officials in sixty-three per cent of the cities surveyed identified low-paying jobs as a primary cause of hunger.

The legislature finds that the last increases in the minimum wage have not restored the lost value. Nor has the economy stood still. The State cannot boast of low unemployment when so many must work two jobs just to make ends meet.

SECTION 2. Section 387-2, Hawaii Revised Statutes, is amended to read as follows:

"§387-2 Minimum wages. Except as provided in section 387-9 and this section, every employer shall pay to each employee employed by the employer wages at the rate of not less than:

The hourly wage of a tipped employee may be deemed to be increased on account of tips if the employee is paid not less than 25 cents below the applicable minimum wage by the employee's employer and the combined amount the employee receives from the employee's employer and in tips is at least 50 cents more than the applicable minimum wage.

Effective January 1, 2006, the hourly wage of a tipped employee may be deemed to be increased on account of tips if the employee is paid not less than 75 cents below the applicable minimum wage by the employee's employer and the combined amount the employee receives from the employee's employer and in tips is at least 50 cents more than the applicable minimum wage."

PART II

SECTION 3. Section 383-61, Hawaii Revised Statutes, is amended to read as follows:

"§383-61 Payment of contributions; wages not included. (a) Contributions with respect to wages for employment shall accrue and become payable by each employer for each calendar year in which the employer is subject to this chapter. The contributions shall become due and be paid by each employer to the director of labor and industrial relations for the fund in accordance with [such] the rules as the department of labor and industrial relations may prescribe, and shall not be deducted, in whole or in part, from the wages of individuals in the employer's employ.

(b) Except as provided in subsections (c) [and], (d), and (e), the term "wages" does not include remuneration paid with respect to employment to an individual by an employer during any calendar year which exceeds the average annual wage, rounded to the nearest hundred dollars, for the four calendar quarter period ending on June 30 of the preceding year.

The average annual wage shall be computed as follows: on or before November 30 of each year the total remuneration paid by employers, as reported on contribution reports on or before such date, with respect to all employment during the four consecutive calendar quarters ending on June 30 of [such] that year shall be divided by the average monthly number of individuals performing services in such employment during the same four calendar quarters as reported on [such] the contribution reports and rounded to the nearest hundred dollars.

(c) For calendar years 2005, 2006, and 2007 only, the term "wages" as used in this part does not include remuneration in excess of $7,000 paid with respect to employment to an individual by an employer. This subsection shall apply only to the contribution rate paid into the unemployment insurance trust fund.

[(c)] (d) For the calendar year 1991 only, the term "wages" does not include remuneration in excess of $7,000 paid with respect to employment to an individual by an employer.

[(d)] (e) For calendar year 1988 only, the term "wages" as used in this part does not include remuneration paid with respect to employment to an individual by an employer during the calendar year [which] that exceeds:

provided that "wages" with respect to which contributions are paid are not less than that part of remuneration which is subject to tax in accordance with section 3306(b) of the Internal Revenue Code of 1986, as amended.

[(e)] (f) If an employer during any calendar year acquires substantially all the property used in a trade or business, or in a separate unit of a trade or business, of another employer, and after the acquisition employs an individual who prior to the acquisition was employed by the predecessor, then for the purpose of determining whether remuneration in excess of the average annual wages has been paid to the individual for employment, remuneration paid to the individual by the predecessor during the calendar year shall be considered as having been paid by the successor employer. For the purposes of this subsection, the term "employment" includes services constituting employment under any employment security law of another state or of the federal government.

[(f)] (g) Subsections (b) through [(e)] (f) notwithstanding, for the purposes of this part the term "wages" shall include at least that amount of remuneration paid in a calendar year to an individual by an employer or the employer's predecessor with respect to employment during any calendar year which is subject to a tax under a federal law imposing a tax against which credit may be taken for contributions required to be paid into a state unemployment fund.

[(g)] (h) In accordance with section 303(a)(5) of the Social Security Act, as amended, and section 3304(a)(4) of the Internal Revenue Code of 1986, as amended, any contributions overpaid due to a retroactive reduction in the taxable wage base may be credited against the employer's future contributions upon request by the employer; provided that no employer shall be given a cash refund."

PART III

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.