NRA Dissapointed With No Tax Relief for Small Businesses in New Bill

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. October 14, 2008

WASHINGTON, DC, January 11, 2007. The National Restaurant Association (NRA), representing an industry that is one of the nation's largest private-sector employers with 12.8 million workers and 935,000 restaurant-and-foodservice locations, today expressed disappointment upon House passage of a $2.10 increase in the federal minimum wage without any tax relief or safeguards for small businesses.

"Restaurants are found in every city across the country and serve as the cornerstone of our economy, rewarding career opportunities and community involvement," said Steve Anderson, president and chief executive officer of the Association. "One out of six new jobs in the economy are in eating and drinking establishments; nine out of 10 salaried employees at table service restaurants - including owners, operators and managers - started as hourly employees; more than nine out of 10 restaurateurs contribute food, money or other resources to their communities.

"Seventy percent of the nation's restaurants are small businesses," said Anderson. "The impact of the proposed minimum wage increase is expected to be significant, affecting restaurant employers, employees and the millions of customers they serve. Research indicates that when the minimum wage is raised, prices go up and job opportunities go down."

After the last wage hike in 1996 and 1997, according to a nationwide NRA survey of 1000 restaurants, 146,000 jobs were cut from restaurant payrolls and operators postponed plans to hire an additional 106,000 employees. In nationwide surveys conducted in October 2006, restaurant operators reported that they plan to take a number of actions if the federal minimum wage was increased from $5.15 to $7.25 over the course of 30 months:

o The most common action planned by restaurant operators would be an increase in menu prices, with nearly nine out of 10 operators saying they would increase menu prices as a result of a $2.10 minimum wage increase. Ninety-eight percent of quickservice operators said they would increase menu prices, compared to about three out of four family dining and casual dining operators.

o In addition to job losses, roughly one-half of restaurant operators said they would reduce the number of employee hours worked.

o Approximately one out of four restaurant operators said they would postpone plans for new hiring if the federal minimum wage rose to $7.25 over the course of 30 months.

o Approximately three out of 10 restaurant operators said they would cut employee benefits as a result of a minimum wage increase from $5.15 to $7.25.

o In general, the largest impact would be seen in the quickservice, family dining and casual dining segments, with fine dining experiencing a comparatively smaller impact.

The National Restaurant Association supports two industry specific tax issues that would mitigate the impact of a wage increase - accelerated depreciation for newly-constructed restaurant buildings, and a provision to ensure that Congress does not impose a FICA tax increase on employers as part of a mandated wage increase.

"The Association is encouraged by reports indicating that the Senate will consider a more balanced approach. Thus far, Senate Majority Leader Harry Reid (D-NV) and Senate Majority Whip Dick Durbin (D-IL) have indicated support for targeted relief to small businesses relevant to the minimum wage. Also today, Senate Finance Chairman Max Baucus (D-MT) conducted a hearing on the potential tax relief for employers who pay the minimum wage. We praise these Democratic leaders and their Republicans counterparts in the Senate who are willing to consider small business offsets," said Anderson.

The National Restaurant Association has been a leader in the debate on minimum wage on behalf of the restaurant industry. The Association chairs the Coalition for Job Opportunities, a group of more than 30 business organizations opposed to government-mandated increases in the entry-level wage.