BOSTON – President Barack Obama’s call to raise the federal minimum wage, combined with a proposed Massachusetts bill to raise the state minimum wage has spurred a debate among legislators and business groups over the impact of such increases.

“If you boost the income of people who are poorly paid, it will have a positive effect on the economy, because it will increase consumer purchasing power, which benefits small businesses,” Sen. Jamie Eldridge, D-Acton, said in a phone interview.

Eldridge has signed on to a bill filed by Sen. Marc Pacheco, D-Taunton, that would raise the minimum wage from $8 per hour to $11 per hour over the next three years. The last time Massachusetts raised the state minimum wage was in 2008 when it went from $7.50 per hour to $8 per hour.

Eldridge said a higher minimum wage could allow workers to pay for their basic needs out of pocket, without relying on government programs, such as subsidized housing or food stamps.

“It’s troubling that people are working very hard, but because they’re not earning a living wage, they need to depend on the government even more,” he said.

Sen. Michael Barrett, D-Lexington, vice chair of the Joint Committee on Labor and Workforce Development, who also backs the bill, said one of the most difficult issues is determining where the minimum wage should be set.

“The minimum wage should be a living wage; it should not be a wage that makes you rich,” said Barrett. “It should enable you to get by if you work hard.”

An annual minimum-wage salary in Massachusetts is about $16,000. Seven other states have higher minimum wages than Massachusetts, including Connecticut, with a minimum wage of $8.25 per hour and Vermont, at $8.60 per hour, Washington state has the highest minimum wage at $9.19 per hour.

In the State of the Union address last week, Obama said he wants to raise the federal minimum wage from $7.25 per hour to $9 per hour. This would put Massachusetts’ minimum wage at $9.10 per hour, requires the state minimum to be 10 cents above the federal rate.

Business and retail organizations are opposed to raising the minimum wage, because it would raise the cost of business, making it more difficult for small businesses to employ staff.

“If we raise minimum wage, we will create real problems for workers and small businesses who are trying to serve their customers,” said Jon Hurst, president of the Retailers Association of Massachusetts. “If customers aren’t spending more, we aren’t employing people.”

Hurst said the state’s top priority should be job creation instead of higher wages. In December, Middlesex County’s unemployment rate was 5.1 percent, compared to 7.8 percent at the national level, according to the Bureau of Labor Statistics.

For cities and towns near the state border, such as Lowell, higher wages could put businesses at a disadvantage with companies in New Hampshire, which has a minimum wage of $7.25 per hour.

“The mandates public officials put on the backs of small businesses affect competition out of state,” Hurst said. “It’s putting at a great advantage, our competition.”

However, Robert Forrant, a University of Massachusetts Lowell history professor who specializes in labor studies, said there is little evidence that incremental minimum wage increases will negatively impact the job market.

“Places that employ people at minimum wage still need a workforce, because they are not the kind of jobs that you can eliminate through technology; they are still labor-intensive,” Forrant said.

Michael Carter, a UMass Lowell economics professor, said economists are divided on whether the minimum wage spurs or constricts business, but he feels the minimum wage allows businesses to pick from a better- quality applicant pool.

“If you have higher minimum wage, it raises the bar in terms of what people consider to be fair, just, and reasonable, which is necessary to attract qualified workers,” Carter said.

By Joel Senick

BU News Service

WASHINGTON —When legislation governing the nation’s farm programs, passed in 2008, expired at the end of September, almost three-quarters of its provisions – notably food stamps and federal crop insurance – stayed intact, since they largely involve mandatory programs for which Congress extended funding through the current 2013 fiscal year.

But dairy farmers found themselves without a safety net.

Since Oct. 1, dairy farmers in Massachusetts and across the country have been without the Milk Income Loss Contract – MILC – program, a subsidy that compensated dairy farmers when milk prices dropped below a set level. The program expired along with the Food, Conservation and Energy Act of 2008, commonly referred to as the farm bill.

Due to disagreements between the Democratic-controlled Senate and Republican-dominated House, Congress failed to pass new legislation before adjourning in September for the fall election campaign, leaving the task to the current “lame duck” session.

If a farm bill fails to pass before the 112th Congress adjourns for good at the end of this month, legislators should draft a short-term fix for dairy producers, declared U.S. Rep. James McGovern, D-Mass., who sits on the House Agriculture Committee.

“We got a figure out a way to make sure our dairy farmers don’t get the short end of the stick,” said Mr. McGovern. According to a 2011 report from the U.S. Department of Agriculture’s New England office, the Bay State had 13,000 milk cows, which produced 220 million pounds of milk annually.

“Honestly, I don’t know how the process is going to proceed, I don’t think anybody does,” said Mr. McGovern added in an interview. “It remains to be seen where the farm bill fits in terms of the priorities of the Republican leadership here in the House. Up to this point they haven’t wanted to talk about it.”

Currently, there are slightly fewer than 200 dairy farmers in Massachusetts and most of them participated in the MILC program, said John Devine, a program specialist with the Massachusetts Farm Service Agency – a branch of the USDA. Dairy farmers rely on government aid because the price of milk can swing greatly.

In fiscal year 2012, which ended Sept. 30, the Massachusetts Farm Service Agency allocated $1.1 million in MILC subsidies to dairy farmers in the state. The amount made up 16 percent of the agency’s total agricultural disbursements for the year, according to Mr. Devine.

Milk prices have risen since last summer: In October, milk sold for $21.10 per hundredweight (approximately 12 gallons), up from $16.20 in May. However, the price of feed, such as corn and soybeans, also has risen this year due to one of the worst droughts in decades in key Midwest farming states.

Even with the high price of milk, the MILC program was needed this year to help New England farms offset their losses, said Alan Everett, chairman of the dairy committee of the Massachusetts Farm Bureau, which lobbies on behalf of farms in the Bay State.

“Right now, the milk pricing seems to be wide fluctuations,” said Mr. Everett. “We have a good year then we have a fair year, then we have a couple bad years. It’s not very regular.”

Mr. Everett and his wife, Terry, own Hemingway Hill Farm in Williamsburg, just west of Amherst. He said their farm received upwards to $700 a month from the MILC program in the months before the program expired.

“For dairy farmers it’s really not so great right now because we have to buy those inputs for the cows,” said Mr. Everett, referring to feed. He tends to around 30 dairy cows on his farm at any given time, and has been producing milk since 1981.

“In the Midwest where they can grow their own grains, it’s not so bad for them,” Mr. Everett explained. “In Massachusetts and New England, there are a lot of us farmers who aren’t growing our own grains and we’re hurting.”

In July, the Senate passed its version of the farm bill, which sought to tackle the uncertainty of milk prices with a new regimen designed to replace the MILC program. Under the Senate provision, farmers would be able buy into an insurance program that would cover farmers if their milk production cost rose to $4 or more above the sale price per hundredweight. Another provision would require participants in the program to cut production by 2 to 3 percent when there is an oversupply of milk that causes prices to drop.

“It’s an attempt to try to bring supply and demand more into line,” said Everett, who suggested that such a system could bring greater stability to the price of milk.

The bill also extended the MILC program until June 30, 2013, providing for a transition period for farmers before they decide on whether to buy into the new insurance program.

But the U.S. House has yet to take up its version of the farm bill; in that chamber, the legislation has been stuck between conservatives who want greater cuts in a number of agricultural programs, and liberals who object to large cuts in the food stamps – now known as the Supplemental Nutrition Assistance Program.

A version of the farm bill that cleared the House Agriculture Committee last summer contains the same insurance-based milk program that passed in the full Senate. However, the House committee legislation does not include an extension of the current MILC program. Instead, farmers would retroactively receive MILC payments until the new program is implemented.

If some form of dairy legislation does not pass Congress before the end of the year, the country would revert back to agriculture policy from the 1940s, called parity pricing. This would require the government to purchase milk above market rates, driving up its price, Mr. Everett noted.

“I think there will be a bad backlash if they don’t” pass a new farm bill, Mr. Everett said, pointing out that “people get upset when the price of milk goes up in the store.”

He added with a chuckle, “I don’t, but it doesn’t make me very popular.”

By Mounira Al Hmoud
BU News Service 

WASHINGTON – Rep. Peter Welch, D-Vt., is pushing for Congress to pass legislation that could require large out-of-state and online retailers to collect state sales taxes, closing a loophole now estimated to cost states about $23 billion annually.

Welch is among the sponsors of two similar bills that would allow states to force out-of-state Internet and catalog retailers to collect sales taxes and then remit them to those states where they are doing business. While the debate over this issue in recent years has pitted brick-and-mortar retailers against their online competitors, Welch sees it as a question of how to spur revitalization of downtowns.

“Online retail is getting bigger and is extremely popular, it is an important part of the economy,” said Welch, “but our downtowns and brick and mortar retailers are also extremely important…Downtowns are vital in Vermont to the sense of community and one of the pressures they are under is that they have an enormous competitive disadvantage.”

Proponents argue the legislation does not involve imposing a new tax, but that brick-and-mortar retail operations are now at a disadvantage by having to collect an existing tax that online retailers do not.

“It’s not a new tax, it’s a due tax,” Welch declared Wednesday at a rally on Capitol Hill on behalf of the legislation, held in conjunction with the National Conference of State Legislatures’ fall forum.

This year, Vermont could lose an estimated of $44.8 million through the inability to collect sales taxes on online and catalog purchases, according to the NCSL.

In the Senate, Majority Whip Richard Durbin, D-Ill, has introduced similar legislation along with two Republicans: Sens. Michael Enzi of Wyoming and Lamar Alexander of Tennessee. According to a spokeswoman, Durbin is “is keeping all of his options open to move the bill before the end of the year as a stand-alone bill or as an amendment to a larger piece of legislation.”

Said Enzi, “This bill empowers states to make the decision themselves. If they choose to collect already existing sales taxes on all purchases, regardless of whether the sale was online or in store, they can. If they want to keep things the way they are, it’s a state’s choice.”

Tasha Wallis, executive director of the Vermont Retail Association, noted that the state is already at a disadvantage in terms of retail competition.

“Vermont is a small state and [neighboring] New Hampshire [doesn’t have] a sales tax so we’re very familiar with the competition of sellers who don’t charge sales tax,” said Wallis. “Sales tax exemption for out-of-state Internet sellers is a form of unfair competition for our members.”

Welch and Wallis said buyers now often use stores as show rooms, coming in to browse products, but opting to buy them online to save money. “That’s not a fair situation for out retailers,” said Welch.

While one large online retailer, Amazon, has swung its support behind the legislation, several other large online businesses remain opposed. And the bills also have encountered opposition from states that do not currently collect sales taxes.

Sen. Kelly Ayotte, R-N.H., who has led Senate opposition to the online sales tax legislation along with Sen. Ron Wyden, D-Ore., said in an email: “This issue is about state sovereignty, especially for a non-sales tax state like ours. I will continue to fight any effort that forces New Hampshire’s online businesses to collect sales taxes for other states,”

Wyden’s home state of Oregon also does not have a sales tax, along with Alaska, Delaware, and Montana.

Technically, businesses in the latter states would not be directly affected since the legislation concerns only states with sales tax. However, if a New Hampshire business with an online presence sells to a customer in a state with sales tax, customers in that state could be charged the sales tax of their home jurisdiction.

The debate over collecting Internet sales taxes is not new. Two past Supreme Court cases have ruled that compelling a merchant to collect sales tax for a state in which it does not have a physical presence is a violation of the U.S. Constitution’s interstate commerce clause. In the most recent one, Quill v. North Dakota in 1992, the high court held that the more than 7,500 local sales tax systems across the nation were too complicated for a retailer to know how much tax to collect.

In response, 24 states established the Streamlined Sales and Use Tax Agreement in 2005 to simplify and modernize their sales and use tax collection systems. The agreement included an amnesty program in which states would forgive past sales taxes owed by companies if they voluntarily register to collect sales taxes going forward.

Companies that do not agree to this arrangement would run the risk of being compelled to pay back sales taxes when and if Congress passes the bills now pending. So far, Vermont is the only state in New England that has signed on to the Streamlined Sales and Use Tax Agreement.

The bills include a small business exemption. “They are a lot of individuals who have a small portion of their sales online and we do not want to burden them with a lot of software expenses that will really hurt their businesses,” Welch said. One of the bills defines a small business as taking in less than $1 million annually, while another sets the threshold at $500,000.

Welch is optimistic that the legislation has a chance of being enacted during the current lame duck session, particularly given the current debate over avoiding the “fiscal cliff.” Noted Welch, “…It is relevant in current discussion on budget revenue and there is growing support among my Republican colleagues.”

If the legislation does not pass this year, the current visibility being accorded to the issue “is a good opportunity to build more support and help strengthen the foundation for its passage in the next session of Congress,” he added.

MASSACHUSETTS – Democrat Joe Kennedy the Third will be filling the Congressional seat left vacant by the retiring Barney Frank.

The young Kennedy won a decisive victory over Republican challenger Sean Bielat. BU News Service’s Mike Neff took a look at the race for the Fourth District.

MASSACHUSETTS – Incumbent John Tierney is the winner of a Congressional race shadowed by scandal. The margin of victory – just a few thousand votes between the Democrat and Republican challenger Richard Tisei.

Tisei’s campaign officials say they will be looking more closely at voter returns. BU News Service reporter Alex Orr has the story of Tierney’s rocky road back to Washington.