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By Hank Behar
Thanks to a revenue surplus, no new gasoline or cigarette taxes for Utah retailers are expected in the near future. When it comes to the spiraling costs of doing business, however, look not to California for good news, since higher Workers' Compensation premiums are in the offing. In New Mexico, a new cigarette tax was stomped out before it had a chance to light up, and in Colorado, the legislature reversed a court decision on below-cost sales of gasoline, much to the dismay of the state's petroleum marketers, who pledge to reverse the reversal. And in Arizona, a small miracle is playing out, as bipartisan efforts work toward increasing Workers' Compensation benefits.
"It would be going a bit too far to say that things are tranquil around here -- they never really are; this is too dynamic a business for that -- but I will say we're presently enjoying a period of relative calm when it comes to rumblings from the state legislature," said John Hill, executive director of the Utah Petroleum Marketers & Retailers Association (UPMRA). "They're just not in a taxing mood these days since the state books are showing a surplus and I'm happy to say there are no new cigarette or gasoline taxes on the horizon."
And how long, we asked Hill, does he expect this "condition" to last?
"Until next year," he replied. "That's when some new infrastructure is planned for the area west of Salt Lake, and when that gets underway, we expect there will be a drive for a rise in gasoline taxes. We intend to fight it, of course, but in the meantime we're enjoying the lull."
In 2003, California reformed its Workman's Compensation legislation, which resulted in a whopping reduction of more than 50 percent in premiums, and the insurance commissioner is now asking for an additional 14.2 percent cut in premiums.
But a coalition of labor groups and lawyers are organizing a drive to roll back the reforms, which, says John Handley, government relations director for the California Independent Grocers Association (CIGA), "will wipe out all the gains we've made in bringing premiums to a reasonable level. The fact is that during the years immediately preceding the 2003 reforms, premiums had skyrocketed, doubling and tripling almost overnight. If premiums go back to those levels, many businesses will just have to eat the increases and sadly, some will be forced out of business. We're fighting the rollback, but we have no way of knowing yet what the outcome will be."
The state legislature is expected to vote on the matter during July or August. Gov. Schwarzenegger hasn't said where he stands on the issue.
For states that are being assaulted by their legislators with ever-increasing cigarette taxes, a glimmer of hope is emanating from New Mexico. There, a recent effort to raise cigarette taxes by 60 cents a pack was not only defeated, but hardly saw the light of day.
"It died before it could even get out of committee," reported Ruben Baca, state executive of the New Mexico Petroleum Marketers Association (NMMA). "I spoke to every committee member, and reason prevailed. They had already levied a 70-cent tax on cigarettes two years ago, which put our stores in a very unfair position against the Native American smoke shops, which can sell cigarettes relatively tax-free. The result was that overnight our stores lost 15 percent of their tobacco business, and c-stores depend greatly on tobacco sales since it's usually their highest grossing category."
The cigarette tax demon hasn't been put to bed, however. It's proved to be a favorite source of revenue for states squeezed by budget deficits, so New Mexico may have to fight the battle all over again soon. But for now, it can take credit as being one of the few states to stave it off.
In Colorado, supermarketer Kroger, after being rebuffed in court, has effectively lobbied for a law to allow it to sell gasoline below cost.
"When the court told Kroger it could no longer sell gasoline below cost," observed Roy Turner, executive vice president of Colorado/Wyoming Petroleum Marketers Association (CWPMA). "Kroger hired a lobbying firm that helped somehow to get a law passed that effectively reversed the court decision by repealing the unfair practices law on gasoline. That made it possible for shoppers to bundle their grocery purchases so they could qualify to buy gas at Kroger's at prices that no gas station could match or beat -- because Kroger's prices are, at many locations, below cost."
The effect of the law goes beyond gasoline, however. "The law applies to all goods sold in the state of Colorado," Turner said. "Therefore, it's now possible for a retailer to build inducements into its marketing programs that include below-cost pricing. What that will lead to is anyone's guess at this time. But it's my guess that it's not in the best interests of Colorado businessmen or consumers. In the meantime, we will return to the legislature every year until we get the unfair practices law back."
Bipartisan cooperation may be hard to come by in today's political arena, but in Arizona an admirable exception is being made in the area of Workers' Compensation.
"Legislators on both sides of aisle, together with the business community, labor and insurers, have been working in a positive way toward a legislative compromise that will raise the maximum monthly benefit for compensation recipients," said George Seitts, president of the Arizona Food Marketing Alliance in Phoenix.
The compromise increases rates in a phased-in approach through 2009, with caps removed in 2010 and beyond. The maximum compensation then automatically goes up every year based on average wage rates. At issue by a number interests is the method of indexing.
"The bill would have to go to a vote by the Legislature for approval," noted Seitts, "and then onto the governor for her consideration. Until this compromise, it looked like a ballot initiative would be the only option for groups seeking change."