1.1 	A bill for an act
1.2 	relating to employment; establishing a state living wage; imposing a tax on 
1.3 	employers that do not pay a living wage to their employees; using the proceeds 
1.4 	of the tax to increase the amounts of working family tax credits; amending 
1.5 	Minnesota Statutes 2004, sections 289A.01; 290.0671, by adding a subdivision; 
1.6 	proposing coding for new law in Minnesota Statutes, chapter 295.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. LEGISLATIVE FINDINGS; PURPOSE.
 1.9 	The legislature finds that:
1.10 	(a) An individual employed full time, contributing talent and energy to the 
1.11 	individual's employer and for the good of the individual's community, deserves to receive 
1.12 	a living wage, which is enough to pay for food, shelter, clothing, transportation, child care, 
1.13 	health care, and other basic necessities for the individual's family.
1.14 	(b) A growing number of Minnesota employees do not receive a living wage.
1.15 	(c) Full-time employment at the minimum wage is grossly inadequate for employees 
1.16 	trying to pay for essentials.  Even employees earning twice the minimum wage often 
1.17 	cannot meet living expenses, and if they can, they are only one illness or setback away 
1.18 	from becoming homeless.
1.19 	(d) Some families spend nights in homeless shelters even though the parents are 
1.20 	employed full time because their wages are insufficient to cover the security deposit and 
1.21 	rent for an apartment, much less to afford the American dream of homeownership.
1.22 	(e) Rising health care costs often force low-wage employees to make difficult 
1.23 	choices between health care for their family and other basic needs.  As a result, low-wage 
1.24 	employees often neglect preventive care and put off necessary treatment until the medical 
1.25 	condition becomes acute, requiring more costly treatment.
2.1 	(f) To minimize the hardship faced by these families, the state provides assistance to 
2.2 	them.  Costly government services such as health care and housing subsidies are required to 
2.3 	support employees who do not receive a living wage.  In effect, taxpayers are subsidizing 
2.4 	businesses that pay low wages by helping meet the living expenses of their employees.
2.5 	(g) Minnesota taxpayers have spent billions of dollars over the years subsidizing 
2.6 	these companies and their inadequately paid employees.
2.7 	(h) It should be the responsibility of employers who benefit from the hard work of 
2.8 	their employees to compensate those employees with wages adequate to purchase child 
2.9 	care, health care, housing, food and clothing, education expenses, transportation, and other 
2.10 	necessities of daily living and to enable them to save for retirement or disability.
2.11 	(i) Although there are great disparities in living costs among families, it is clear that 
2.12 	few families can make ends meet without assistance if employees are paid less than $11 
2.13 	per hour, or $14 per hour if their employer does not provide health care benefits.
2.14 	(j) Some employers, including some of the largest most profitable businesses in the 
2.15 	country, have become so dependent upon government subsidies to support their employees 
2.16 	that they need some time to restructure the prices of their goods and services in order to 
2.17 	pay a fair wage to their employees.
2.18 	(k) Employers that fail to provide an adequate wage should be held accountable 
2.19 	for the burden placed on the state and its taxpayers when their employees are unable to 
2.20 	purchase basic necessities for themselves and their families.
2.21 	(l) Until employers meet their responsibility to their employees, businesses should 
2.22 	pay at least a portion of the taxpayer's burden for every employee that they inadequately 
2.23 	compensate.
2.24 	(m) A low-wage compensation fund supported by those employers could help raise 
2.25 	the household income for underpaid employees, thereby reducing their reliance on costly 
2.26 	government services.
2.27 	(n) Initially, employers who do not pay all of their employees at least a living wage 
2.28 	should cover at least one-third of the taxpayer's cost from their failure to pay a living 
2.29 	wage. In time, these businesses should assume an increasing percentage of the taxpayer 
2.30 	burden unless they pay all of their employees a living wage.

2.31 	Sec. 2. Minnesota Statutes 2004, section 289A.01, is amended to read:
2.32 	289A.01 APPLICATION OF CHAPTER.
2.33 	This chapter applies to laws administered by the commissioner under chapters 290, 
2.34 	290A, 291, and 297A, and sections 295.61 to 295.63,298.01,and 298.015.

3.1 	Sec. 3. Minnesota Statutes 2004, section 290.0671, is amended by adding a subdivision 
3.2 	to read:
3.3 		Subd. 8.Low-wage compensation surtax adjustment. (a) For taxable years 
3.4 	beginning after December 31, 2006, the amount of credits otherwise payable under this 
3.5 	section is annually increased as provided in this subdivision.
3.6 	(b) By September 1, 2007, and each subsequent year, the commissioner must 
3.7 	determine the amount of the proceeds of the low-wage compensation surtax imposed 
3.8 	under section 295.61 from the previous calendar year.
3.9 	(c) The commissioner must determine a uniform percentage increase in the credits 
3.10 	payable under this section for the current taxable year by dividing the amount determined 
3.11 	under paragraph (b) by the total amount expended for credits under this section in the 
3.12 	previous taxable year.
3.13 	(d) The credits payable under this section for the current taxable year, as determined 
3.14 	under subdivisions 1 to 7, must be increased by the percentage determined under 
3.15 	paragraph (c).

3.16 	Sec. 4. [295.61] LOW-WAGE COMPENSATION SURTAX.
3.17 		Subdivision 1.Definitions. (a) As used in this section, the terms in this section 
3.18 	have the meanings given them.
3.19 	(b) "Employer" means a person doing business in Minnesota that:
3.20 	(1) during any of the calendar years 2006, 2007, or 2008, employs more than 20 
3.21 	full-time equivalent employees in businesses operated in this state;
3.22 	(2) during any of the calendar years 2009, 2010, or 2011, employs more than ten 
3.23 	full-time equivalent employees in businesses in this state; and 
3.24 	(3) during 2012 or a later calendar year, employs any number of individuals in 
3.25 	this state.
3.26 	(c) "Living wage" means $14 per hour for calendar year 2006, adjusted for inflation 
3.27 	in subsequent years as provided in section 290.06, subdivision 2d, except that for the 
3.28 	purposes of this subdivision the percentage increase must be determined from the year 
3.29 	starting September 1, 2005, and ending August 31, 2006, as the base year for adjusting for 
3.30 	inflation for the calendar year beginning after December 31, 2006, and further adjusted 
3.31 	as follows:
3.32 	(1) for employees whose primary work location in Minnesota is outside of the 
3.33 	metropolitan area defined in section 473.121, subdivision 2, the amount otherwise 
3.34 	determined under this subdivision is reduced by $2 per hour; and 
4.1 	(2) for employees who are provided a qualified health insurance benefit, the amount 
4.2 	otherwise determined under this subdivision is reduced by $3 per hour.
4.3 	(d) "Qualified health insurance benefit" means a plan of health coverage that is at 
4.4 	least equivalent to a number two qualified plan as defined in section 62E.06.
4.5 		Subd. 2.Imposition. A low-wage compensation surtax is imposed on employers 
4.6 	who pay their Minnesota employees wages that are less than a living wage as provided 
4.7 	in this section.
4.8 		Subd. 3.Rate of tax. (a) For calendar years 2006 through 2011, the tax is one-third 
4.9 	of the amount by which the hourly wage paid to each employee of an employer who is 
4.10 	subject to the tax under this section is less than the living wage.
4.11 	(b) For calendar years 2012 and thereafter, the tax is two-thirds of the amount by 
4.12 	which the hourly wage paid to each employee of an employer who is subject to the tax 
4.13 	under this section is less than the living wage.
4.14 		Subd. 4.Startup businesses. (a) For the first three calendar years after a person 
4.15 	begins to do business in the state, the person, as defined under section 295.50, subdivision 
4.16 	9c, is exempt from the tax under this section.  For the fourth through the sixth calendar 
4.17 	years, the tax that would otherwise be imposed under this section is reduced by two-thirds; 
4.18 	for the seventh through the ninth calendar years, the tax is reduced by one-third.
4.19 	(b) The exemption under this subdivision terminates effective in the first calendar 
4.20 	year when the business begins to employ more than ten full-time equivalent employees in 
4.21 	the state.
4.22 		Subd. 5.Use of revenues. The commissioner must deposit the proceeds of the tax 
4.23 	imposed under this section in the general fund.  The amount of the tax shall be annually 
4.24 	determined by the commissioner and used to increase the Minnesota working family 
4.25 	credits provided under section 290.0671.

4.26 	Sec. 5. [295.62] RETURNS; PAYMENT; AUTHORITY OF DEPARTMENT.
4.27 		Subdivision 1.Return; payment of tax; audit. On or before January 31 of each 
4.28 	year, a return, in a form required by the department, with a remittance of the tax owed 
4.29 	under section 295.61 for wages paid during the preceding year, must be filed with the 
4.30 	department by each employer required to pay the tax. The filing and remittance may 
4.31 	be done electronically.  For the purposes of reporting or paying the tax, the employer 
4.32 	and any agent of the employer are subject to the audit and enforcement provisions of 
4.33 	chapter 289A that apply to collections of the corporate franchise tax.  Each return must be 
4.34 	authenticated by the person filing the return or by the person's agent who is authorized in 
4.35 	writing to file the return.
5.1 		Subd. 2.Information. A person required to report and pay to the department a tax 
5.2 	under section 295.61 shall keep records, file statements, make returns, and comply with 
5.3 	the provisions of sections 295.61 to 295.63 and the rules adopted by the department.  Each 
5.4 	return or statement must include the information required by the rules of the department.

5.5 	Sec. 6. [295.63] ADMINISTRATION; RULES.
5.6 	The department shall:
5.7 	(1) administer and enforce the provisions of sections 295.61 to 295.63 by applying 
5.8 	the provisions of chapter 289A that apply to administration of the corporate franchise tax 
5.9 	to taxpayers under sections 295.61 to 295.63;
5.10 	(2) cause to be prepared and distributed forms and information that may be necessary 
5.11 	to administer the provisions of sections 295.61 to 295.63; and 
5.12 	(3) adopt rules that may be necessary or appropriate to administer and enforce the 
5.13 	provisions of sections 295.61 to 295.63.

5.14 	Sec. 7. EFFECTIVE DATE.
 5.15 	Sections 2 and 4 to 6 are effective for wages paid after December 31, 2005.  Section 
5.16 	3 is effective for taxable years beginning after December 31, 2006.