SiX has partnered with former Georgia State Representative and CEO of Courage for Progress, Renitta Shannon, and Advancing New Standards in Reproductive Health (ANSIRH) to create a new report: “Maternal health, Criminalization of Pregnancy, and Economic Wellbeing: Research Summary and Message Guidance for State Legislators on the Impacts of the Dobbs Decision.”
The report provides research summaries, key takeaways, and evidence-based messaging guidance- all in easy to pull out sections- to meet the unique needs of state legislators. Whether speaking to colleagues or press, this packet provides references and tools to discuss the impacts of the Dobbs decision in these three key areas.
Read the report to access research summaries, key takeaways, and message guidance.
User Error: Reproductive Health, Rights, and Justice
User Error: Reproductive Health, Rights, and Justice
People seeking abortion care, abortion clinics and providers, and people who help facilitate abortion care, such as abortion funds and practical support networks, are being surveilled by both state agencies and private actors. The corporations that govern our digital spaces act as a significant, largely unregulated arm for these surveillance systems, constantly collecting and sharing intimate data about our behaviors, movements, and communications that are easily weaponized. And while some medical information that flows through Big Tech is protected by expanded HIPAA protections, anti-abortion lawmakers are already suing to remove those safeguards.
Big Tech companies and data brokers have supplied anti-abortion groups and law enforcement agencies with the information they need to surveil, criminalize, stalk, doxx, and harass abortion seekers or anyone connected to them. These companies have:
Collected personal information and communications including private Facebook messages and shared them with law enforcement in states that have criminalized abortion.
By: Kairos Action, SiX, and Economic Security Project
Surveillance, work intensification, algorithmic management, and loss of autonomy are not new trends in the workplace. These are tactics that abusive employers have used for centuries. But the rapid introduction of technology, especially artificial intelligence (AI)-driven technologies, in the workplace supercharges existing trends that are harmful to workers.
Technology can be used to advance or undermine progress. Technology does not have to undermine workers’ rights. Tech companies and employers that use these tools are taking advantage of the emergent nature of these technologies to dictate regulatory frameworks, including whether there is one at all. But contrary to what the tech industry might suggest, the proliferation of these abusive tools isn’t inevitable or uncontrollable. They can and should be regulated, including prohibited, to safeguard our rights.
It is important for legislators to understand these harms and who is behind them, and to collaborate with impacted workers and work toward solutions. Black, brown, indigenous, and immigrant workers, especially those who are undocumented, continue to be disproportionately at risk of being exploited, discriminated against, and made victims of predatory practices in the workplace by these technologies. Both private- and public-sector workers are also impacted, and while the use of tech in the workplace undoubtedly affects blue-collar workers, the use also extends to white-collar workers such as educators, writers, lawyers, healthcare professionals, and others, as was highlighted during the SAGAFTRA and WGA strike in 2023.
Tax the Rich: Implementing a State Tax on Investment Gains
Tax the Rich: Implementing a State Tax on Investment Gains
Introduction
The concentration of wealth in the hands of the elite few impacts every facet of our lives. It is directly connected to expanding wealth disparities and the rising cost of living, the existential climate crisis and the rampant expansion of authoritarianism, and it threatens the very existence of the multiracial democracy that we strive for.
This concentration of wealth did not happen by accident; it is not the result of inevitable forces. It is a product of deliberate policy choices over decades and centuries. Billionaires and centi-millionaires (those with at least $100 million in wealth) in America are amassing wealth, with a record 700% increase in inflation-adjusted unrealized capital gains over the last three decades.
Racism, sexism, and classism are entrenched in our current economic system, by design. As a result, Black, immigrant, and Indigenous people, working class and rural communities, women, and queer people are disproportionately exploited and denied prosperity by our economic policies. Some of these problems could be mitigated if the extremely wealthy paid their fair share toward meeting vital social needs, particularly in terms of spurring opportunities for communities experiencing structural poverty. For example, considerable research has shown that high-quality preschool can play an enormous role in helping every child reach their potential. Given the scale of wealth involved, getting the extremely wealthy to pay their fair share in taxes could raise substantial revenues toward vital initiatives like this.
Unfortunately, the absurd regressivity that is evident at the very top of our tax system at the federal level is even more evident at the state level. This is partly because income taxes, as currently designed at the federal and state level, do not reach unrealized gains. For example, billionaire Jeff Bezos was paid about $1.7 million in total compensation by Amazon in 2022, but his net worth in 2023 increased by a massive $70 billion, which amounts to almost $8 million per hour. Furthermore, states have not levied taxes on broad forms of wealth for almost a century, while other countries, including Switzerland since 1848 and Norway since 1892, have retained their wealth taxes. The extremely wealthy in America have employed armies of lobbyists to ensure that their effective tax rates are kept low and that neither federal nor state taxing authorities can effectively tax intergenerational wealth transfers.
Historically, state legislators, in collaboration with the communities most impacted by these policy choices, have led the fight in challenging corporate and billionaire power by organizing communities and building economies that empower people. Modernizing the tax code is an essential piece of this vision. Taxing unrealized gains, in particular, offers an opportunity to reverse the increasingly widening wealth disparities in the United States and to fund our future.
Note on Terminology
Unrealized gains are the increased value of assets that have not yet been sold (or “realized”).
Unrealized capital gains are a type of unrealized gains, specifically, the increased value of stocks, bonds, and other financial securities that have not yet been sold.
Wealth includes ownership of many different types of assets, including real estate, vehicles, and art, but the largest category among the very rich is ownership of businesses, stocks, and mutual funds. Through a series of tax loopholes dubbed “buy, borrow, die,” the ultra-wealthy can hold on to and use financial securities as collateral for loans (often securities-backed lines of credit) instead of selling investments to cover expenses. The loopholes also allow their inheritors to receive these financial assets on a legally allowed “stepped-up” basis (i.e., based on valuing the inherited stock at the current market value) without paying any capital gains taxes (McCaffery, 2019). This means that all inherited capital gains are provided a tax benefit that would not be allowed if someone sold off their financial securities before their death. To make matters worse, the ultra-wealthy would only need to retire and/or move to a state that does not tax income before realizing their capital gains to avoid state taxation (Galle et al., in press).
For example, although Jeff Bezos relied on public investments in physical and human capital infrastructure in Washington State to establish Amazon, he waited until he moved to Florida (a state without a capital gains tax) before selling $2 billion in Amazon stock, depriving Washington of almost $600 million in state revenue. It is imperative that unrealized gains are taxed, or the massive income and wealth inequalities in our country will continue to grow unabated, with the impacts disproportionately felt by communities structurally denied opportunities (Addo & Darity, 2021).
Note on Securities-Backed Line of Credit (SBLOC)
SBLOC is the most common way to borrow in the “buy, borrow, die” scheme and is similar to a home equity line of credit, but financial investments are the collateral instead of real estate. SBLOC’s advantages include: (1) no capital gains taxes, (2) flexible repayment schedules, (3) simple and low-cost approval process, and (4) relatively low interest rates.
While no state currently has a wealth tax on a broad range of assets, the U.S. does levy taxes on some forms of wealth. Property taxes are an example of taxing assets before they are sold, though overall the property tax is regressive. Another example is the federal expatriation tax, which includes a tax on net unrealized capital gains for individuals with a net worth of at least $2 million who have relinquished their U.S. citizenship. As tax codes are common but can be complicated, the policy design and implementation of a new wealth tax model could benefit from the experience of other countries, from academics who have spent time researching these models, and from state legislation at the forefront of this reform in this country.
The following is a policy design discussion focused on taxing one major category of wealth: unrealized capital gains. This discussion pulls primarily from academic sources and focuses on real-world policy decisions. This is not meant to serve as “model” language, but instead to provide policy design considerations and options that policymakers should discuss with local movement groups and impacted communities.
Notes on Income vs. Wealth
“Income is the sum of earnings from a job or a self-owned business, interest on savings and investments, payments from social programs and many other sources. It is usually calculated on an annual or monthly basis. Wealth, or net worth, is the value of assets owned by a family or an individual (such as a home or a savings account) minus outstanding debt (such as a mortgage or student loan). It refers to an amount that has been accumulated over a lifetime or more (since it may be passed across generations).” (Source: Pew Research Center)
Realized capital gains are considered income, and unrealized capital gains are sometimes understood as a form of future income. But as these gains are part of assets that the wealthy can use as collateral, we refer to them in this report as a form of wealth, and a tax on unrealized capital gains as a type of wealth tax.
Please note: The case Moore v. United States was argued in the Supreme Court in part to decide whether unrealized gains can be treated as income from a federal tax perspective, but states are not necessarily limited by this ruling, as it is focused on Congress’ power of taxation under the 16th Amendment.
Types of Assets Included (or Exempted) and Asset Valuation
The first and perhaps most impactful policy design decision is which types of assets to include as taxable forms of wealth. The broadest definition of wealth includes total net assets, or the market value of all financial and nonfinancial assets after debt. For example, a French wealth tax exempts business assets, shares acquired from capital subscription (e.g., agreement to purchase an IPO), artwork, antiques and collectibles, and intellectual property, and is calculated by taxpayers based on the market value of all their other assets (Garbinti et al., 2023). A U.S. example of a broad wealth tax is 2023 CA AB 259, which, if enacted, would eventually apply a 1% tax on worldwide net worth in excess of $50 million and 1.5% on net worth over $1 billion. Care should be taken when considering what types of assets to exempt, as one study found that European wealth taxes that exempted wealth from owner–manager businesses created a tax loophole for the ultra-rich (Piketty et al., 2023).
Note on Financial Assets
“Financial assets include fixed-claim assets (checking and saving accounts, bonds, loans, and other interest-generating assets), corporate equity (shares in corporations), and noncorporate equity (shares in noncorporate businesses, for instance, shares in a partnership). Financial assets can be held either directly or indirectly through mutual funds, pension funds, insurance companies, and trusts.”(Saez & Zucman, 2020)
Unrealized Capital Gains
While wealth takes many forms, proposals by advocates, academics, and policymakers in the U.S. have primarily focused on taxing one category of wealth: unrealized capital gains. Not only is this form of wealth massive (estimated at $8.5 trillion nationally), but it is likely the most politically feasible to address and the least complicated to tax as well. A tax on unrealized capital gains is a relatively simple idea, but there are several policy design options that interested state policymakers and advocates can consider. Many of these proposals assess the value of unrealized capital gains based on gains or losses relative to a year-end market value, also referred to as mark-to-market. Two of the issues around a tax on unrealized capital gains using mark-to-market valuation are the price volatility of financial markets and the uncertain valuation of illiquid assets (Saez et al., 2021).
S&P 500 Historical Annual Returns
(Source: Macrotrends, LLC)
For example, looking at the history of S&P 500 returns above, how can a state budget office develop accurate revenue forecasts when the financial markets shift so quickly? The following policy options include unrealized capital gains tax designs that would help to address these mark-to-market tax concerns.
Unrealized Capital Gains Tax Terminology
“Cost basis” is the original purchase price that the asset was acquired for and is used to calculate net gains or losses.
“Deemed realized gains” are unrealized gains (or built-in gains) that are treated as realized for tax purposes and therefore potentially subject to taxation.
“Exemption threshold” is the amount of net wealth exempted from taxation (e.g., the first $10 million) and therefore determines who the tax applies to.
“Realized capital gains” are the profits from the sale of an asset, calculated as the amount received for the sale minus the cost basis.
“Recognized gains” are the amount of realized or deemed realized gains that are subject to taxation (e.g., after subtracting deferred gains).
“Tax limit” is the maximum amount of tax on a given asset (also referred to as a “cap”).
Phased Mark-to-Market Unrealized Capital Gains Tax
A relatively straightforward proposal for taxing unrealized capital gains is to tax a portion of the increase in value of the underlying asset by comparing the current fair market value at a given point in time to the original purchase price (i.e., mark-to-market). One way to do this is to phase in the tax by effectively recognizing only a portion of the deemed realized gains every year. This phased-in approach reduces the risk of volatility inherent in a mark-to-market tax, as only a portion of financial assets would be taxable in a given year. Academic writing on this idea proposes that 50% of deemed realized gains should be recognized as taxable income, which would effectively include 50% of these shares as taxable income in tax year 1, 25% (half of 50%) in tax year 2, 12.5% in tax year 3, and so on (Gamage & Shanske, 2022). The percentage of deemed realized gains to recognize for tax purposes is a policy decision: a larger percentage would raise tax revenue more quickly and reduce the risk of the extremely wealthy using lobbyists to weaken the tax code, while a smaller percentage would minimize tax revenue volatility and the concern of impacting illiquid taxpayers (Gamage & Shanske, 2022).
Under this bill, Vermont taxpayers with net assets in excess of $10 million (the exemption threshold) would be required to include 50% of their unrealized capital gains (i.e., deemed realized gains) in their taxable income for the year, as if all assets had been sold at fair market value on the last day of the year. This taxable amount has an annual tax limit that cannot exceed 10% of the taxpayer’s net assets in excess of $10 million (Gamage, 2024). The bill also provides for an exclusion of $1 million per category of assets (e.g., real estate, nondistributed interest in a trust, and personal property, such as vehicles or art/collectibles) when calculating the net assets for the tax limit. This helps to simplify the valuation process, as a wealthy individual would only need to assess significant asset holdings, which may have already been done for insurance purposes. This bill does not apply a specific tax rate, but instead adds deemed and recognized capital gains to taxable income for individual income tax calculations. The bill also proportionally reduces the tax for residents who have lived in the state for less than 4 years.
Calculation Example: Phased Mark-to-Market
Income deemed realized and recognized:
Assuming a taxpayer holds stock X with fair market value of $25 million and cost basis of $15 million ($10 million deemed realized gain), and stock Y with fair market value of $25 million and cost basis of $30 million ($5 million deemed realized loss), then:
Total deemed realized gains from stock X and stock Y = $5 million ($10 million – $5 million), and 50% of deemed realized gains are recognized = $2.5 million.
Tax limit/phase-in cap amount:
Assuming stock X and stock Y are the taxpayer’s total assets ($50 million), and assuming personal debt of $20 million, net assets = $30 million:
The cap is 10% of net assets beyond $10 million, or 10% x ($30 million – $10 million) = 10% x $20 million = $2 million.
The lower amount from these two calculations, $2 million, is added to taxable income. All else being equal (assuming no other taxable income or tax credits/deductions) and assuming a Vermont income tax of $17K + 8.75% of taxable income over $279K, this would result in a state income tax of about $168K.
Calculation Example: Phased Mark-to-Market for Jeff Bezos
If Jeff Bezos paid this type of unrealized capital gains tax on Amazon shares he owns:
Total deemed realized gains = $166 billion, and 50% of deemed realized gains recognized = $83 billion.
Tax limit is 10% of net worth beyond $10 million, or 10% x ($198.5 billion – $10 million) = $19.849 billion.
The lower amount from these two calculations, $19.849 billion, is added to taxable income. As above, all else being equal and assuming a Vermont income tax of $17K + 8.75% of taxable income over $279K, this would result in a state income tax of about $1.737 billion.
Withholding Tax on Unrealized Capital Gains
Another policy option is to require extremely wealthy individuals to prepay future realized capital gains taxes through a type of withholding tax (i.e., “pay-as-you-go,” where a portion of estimated tax is sent periodically to the taxing authority before the full amount is due) on unrealized capital gains. This estimated prepayment could be based on the value of unrealized capital gains above a specific exemption threshold, which could be set high enough to not target illiquid millionaires and could also include progressive tax rates based on the amount of unrealized capital gains (Saez & Zucman, 2020). An academic proposal of this withholding tax includes both liquid and illiquid assets (except for retirement accounts) and recommends that the withholding tax rate be one-tenth of the top federal capital gains tax rate (Saez et al., 2021). As with the phased tax above, compared to traditional wealth tax models, the withholding tax model would help to smooth out asset valuation volatility, which is especially important to states, as they are required to enact balanced budgets (Saez et al., 2021).
Valuing Private Businesses/Unlisted Shares
One area of asset valuation that warrants careful consideration is shares of private businesses, which is a major asset class for many of the ultra-wealthy (Saez & Zucman, 2020). In France, the tax administration provides guidelines on how taxpayers can value stocks from unlisted companies (Garbinti et al., 2023). There are many ways that states could consider valuing unlisted shares.
Large Private Businesses. For large private businesses, the value could be based on secondary market valuation, such as by venture capitalists, private equity funds, financial analysts, or recent stock trades (Saez et al., 2021). For wealthy individuals who are unable or unwilling to sell their private shares to cover a tax on unrealized capital gains, a government-run credit program could be created to provide taxpayers with government loans, secured by their illiquid assets, with interest accrued at the Treasury rate and repayment triggered when either the asset becomes liquid or control of the asset is transferred to another party (Saez et al., 2021).
Small Private Businesses. Shares in small private companies could be valued using a straightforward formula based on book value, sales, and profits; for example, Switzerland has successfully used this type of formula (Saez & Zucman, 2020). By utilizing a formula with easily available information, small private businesses would not incur significant administrative costs if one of their owners were subject to an unrealized capital gains tax. Data on small business employee size shows that over 80% of small businesses have zero employees and another 16% have only 1–19 employees, and additional data on business owners reveals that private businesses with more than five employees are owned by families with a median net worth of only $1.25 million and median business assets of $400K. It is clear that relatively few small businesses would need to be valued, and the ultra-wealthy likely have accountants who track basic financial data on their small businesses, which might be needed when selling these businesses or using them as collateral for a loan. Valuation of defined benefit pension plans could also be based on a simple formula that looks at age, tenure, and current salary to approximate accrued benefits (Saez & Zucman, 2020).
Calculation Example: Swiss Private Business Valuation Formula
The value of private businesses in Switzerland is calculated as a three-year average of current net asset value (i.e., total assets minus total liabilities) and a three-year average based on a double weighted and capitalized earnings value. This sounds more complicated than it is. The formula is:
Business Value = [(Average of 3 Years of Adjusted Net Profits) x 2 + Net Asset Value] x 1/3
Capitalization Rate
Let’s suppose that this model is used in the U.S. and a private company had a net asset value of $10 million at the end of 2023 and adjusted net profits of $1 million in 2021, $2 million in 2022, and $3 million in 2023. Let’s also assume a capitalization rate (i.e., expected rate of return) of 8%, which would be determined by statute or regulation. This formula results in a total valuation of $20 million:
2023 Business Value = [(($1M +$2M + $3M)/3) x 2) + $10M] x 1/3 = $20M
0.08
Source: Eckert & Aebi (2020)
Legislative Examples: Business Valuation
Both a California bill and a Vermont bill use a straightforward business valuation formula of book value plus 7.5 times book profits in a given year. In particular cases, certified appraisal values can be used to determine the worth of private business assets.
50308.(c) (3) (D) For purposes of this part, if a valuation is to be calculated by the proxy valuation formula for business entities, that valuation shall be the book value of the business entity according to GAAP plus 7.5 times the book profits of the business entity for the taxable year according to GAAP. However, if the taxpayer can demonstrate with clear and convincing evidence that a valuation calculated via the proxy valuation formula would substantially overstate the value as applied to the facts and circumstances for any taxable year, then the taxpayer can instead submit a certified appraisal of the value of the taxpayer’s ownership interests in the business entity for that year and use that certified appraisal value in place of applying the primary valuation rules of subparagraph (F) or (G).
[...]
(F) For business entities for which the valuation calculated by the proxy valuation formula for business entities is less than fifty million dollars ($50,000,000), the value of the taxpayer’s ownership interests in the business entity will be presumed to be the percentage of the business entity owned by the taxpayer multiplied by the valuation calculated by the proxy valuation formula for business entities.
(G) For business entities for which the valuation calculated by the proxy valuation formula for business entities is fifty million dollars ($50,000,000) or greater, the taxpayer shall submit a certified appraisal of the value of the taxpayer’s ownership interests in the business entity. The value of the taxpayer’s ownership interests in the business entity will then be presumed to be the greater of the following:
(i) The certified appraisal value.
(ii) The percentage of the business entity owned by the taxpayer multiplied by the valuation calculated by the proxy valuation formula for business entities.
5604. (c) (3) (D) Except for assets and entities governed by subdivisions (1) and (2) of this subsection (c), assets excluded under subdivision (A) of this subdivision (3), and assets attached to an ODA, for all other interests in any business entities including all equity and other ownership interests, all debt interests, and all other contractual or noncontractual interests, the fair market value of those interests at the end of any tax year shall be presumed to be the sum of the book value of the business entity according to generally accepted accounting principles for the tax year plus a present-value multiplier of 7.5 times the book profits of the business entity for the tax year according to generally accepted accounting principles, with this entire sum then multiplied by the percentage of the business entity owned by the taxpayer as of the end of the tax year. However, if the taxpayer can demonstrate with clear and convincing evidence that such a presumption would substantially overstate the fair market value, the taxpayer may instead submit a certified appraisal and then use the certified appraisal value as the fair market value.
Indirectly Held Assets. Another consideration is how to deal with assets that are held by trusts or other intermediaries. To reduce tax avoidance, experts recommend that intermediary assets that are controlled by or for the benefit of wealthy individuals be included in a wealth tax, but allocated based on different levels of priority so that the impact is on the wealthiest individuals who control the funds and much less on nontaxable charities that use trust funds for programmatic purposes (Saez & Zucman, 2020). For example, the trust would be responsible for any tax liability related to trust assets unless the beneficiaries receive all of its income distributions, in which case the entire trust would be subject to the withholding tax (Saez et al., 2021).
Legislative Example: Assets in a Trust
A bill in Washington State specifies how to treat the assets of a trust depending on who benefits from or has control over the trust, as well as what happens when intangible assets are transferred to a minor relative.
Sec. 3. TAX IMPOSED. […] (4) The tax imposed in this section does not apply to a resident based on that person’s status as a trustee of a trust, unless that person is also a beneficiary of the trust or holds a general power of appointment over the assets of the trust.
(5)(a) If an individual is treated as the owner of any portion of a trust that qualifies as a grantor trust for federal income tax purposes, that individual must be treated as the owner of that property for purposes of the tax imposed in this section to the extent such property includes intangible assets.
(b) A grantor of a trust that does not qualify as a grantor trust for federal income tax purposes must nevertheless be treated as the owner of the intangible assets of the trust for purposes of the tax imposed in this section if the grantor’s transfer of assets to the trust is treated as an incomplete gift under Title 26 U.S.C. Sec. 2511 of the internal revenue code and its accompanying regulations.
(6) Intangible assets transferred after the effective date of this section by a resident to an individual who is a member of the family of the resident and has not attained the age of 18 must be treated as property of the resident for any calendar year before the year in which such individual attains the age of 18.
Unliquidated Tax Reserve Account (ULTRA)
Another option for taxing assets that are difficult to value is to allow wealthy taxpayers to grant the government a “notional equity interest” on the assets in lieu of a tax payment (Galle et al., 2022). This interest would not confer any voting rights and would only be used for future valuation, as the taxing authority would only receive funds after the assets are sold/liquidated. If the value of the assets rises or falls, the government’s eventual tax revenue would also rise or fall, as it is effectively pegged to the stock’s value, not a set dollar amount. If a taxpayer holds on to these assets for several years, they could defer the tax payments by granting additional equity interest to the government. To address concerns that the wealthy will take advantage of this delay in taxation by lobbying for tax code changes instead of paying their fair share, this policy option could be designed in a way that would only allow taxpayers with liquidity challenges (e.g., all of their wealth is in a single private stock) to defer paying a wealth tax on difficult-to-value assets until their private stocks/assets are sold (Galle et al., 2022). The extremely wealthy, who do not face these liquidity issues, could instead be required to prepay a portion of their deferred tax every year (Galle et al., 2022).
Calculation Example: ULTRA “Ownership”
For example, for a 2% unrealized capital gains tax on private stock, the taxpayer could instead provide the government with 2% “ownership” of these assets. If the taxpayer holds on to these stocks, they begin the second tax year with 98% ownership of the private stock (since, in the first tax year, they chose to grant the government 2% notional equity interest in lieu of a tax payment), and therefore the government would receive an additional 1.96% equity interest (i.e., 2% of 98%), for a total of 3.96%.
Legislative Example: ULTRA
A version of an ULTRA was written into a California bill as a liquidity-based optional unliquidated tax claim agreement (LOUTCA).
50310. (a) Liquidity-based Optional Unliquidated Tax Claim Agreements, to be referred to as LOUTCAs, shall be governed by the following rules:
(1) Taxpayers who are specified as liquidity-constrained taxpayers and who have ownership interests in designated highly illiquid assets, such as startup business entities, shall be able to elect to initiate a LOUTCA to be attached to their ownership interests in those designated highly illiquid assets instead of the net value of those ownership interests or the net value of those assets being assessed at the end of a tax year.
(2) Any taxpayer subject to the tax imposed by this part is presumed to not be specified as a liquidity-constrained taxpayer if the taxpayer’s designated highly illiquid assets are less than 80 percent of the taxpayer’s total net worth. The Franchise Tax Board may adopt regulations in regard to substantiating who is a specified liquidity-constrained taxpayer and in regard to what is a designated highly illiquid asset. It is the intent of the Legislature that most taxpayers subject to the tax imposed by this part should not be specified as liquidity-constrained taxpayers and that publicly traded assets and ownership interests conferring control rights in substantially profitable privately held business entities shall not be designated as highly illiquid assets.
(3) To initiate any LOUTCA, a taxpayer shall sign forms to be created by the Franchise Tax Board that shall have the effect of creating a binding contractual agreement between the taxpayer and the state. A LOUTCA shall be legally binding on the taxpayer, and also on the taxpayer’s estate and assigns, until such time as either the taxpayer or the taxpayer’s estate reconciles the LOUTCA so as to fully liquidate the accumulated tax claims and to then pay all tax due on those liquidated tax claims.
Exemptions, Deductions/Credits, and Limits
As with most taxes, a key policy decision is to determine what amount of a taxable asset should be exempted (i.e., the asset threshold) and what specific tax deductions or credits should be allowed.
Exemption Threshold
A national wealth tax in France, for example, included all French residents and potentially all worldwide assets above a €1.3 million threshold (Garbinti et al., 2023). One study found that having a low exemption threshold (e.g., €1 million) created political opportunities for opponents to highlight cases of illiquid millionaires struggling to pay their wealth tax (Piketty et al., 2023). Applying that lesson, a wealth tax proposed by U.S. Sen. Elizabeth Warren had a $50 million threshold and applied a 2% wealth tax rate up to $1 billion in wealth and a 3% tax rate after that (Saez & Zucman, 2020). An academic paper also proposes a $50 million exemption threshold, which would impact the top 0.05% wealthiest families, or about 100,000 households (Saez et al., 2021).
Legislative Examples: Phase-In Cap
Another taxation limit introduced in recent state legislation is a “phase-in cap amount” to limit the amount of unrealized net gains subject to taxation. For example, a bill in New York would set a phase-in cap of 25% of net assets above a $1 billion exemption threshold, and a bill in Vermont would set a phase-in cap of 10% of net assets above a $10 million exemption threshold.
612-a. (b) Subsequent to two thousand twenty-three, resident individual taxpayers with net assets that are worth one billion dollars or more at the end of the last day of any tax year shall recognize gain or loss as if each asset owned by such taxpayer on such date were sold for its fair market value on such date, but with adjustment made for tax paid on gain in previous years. Any resulting net gains from these deemed sales, up to the phase-in cap amount, shall be included in the taxpayer’s income for such taxable year. […]
(c) For each date on which gains or losses are recognized as a result of this section, the phase-in cap amount shall be equal to a quarter of the worth of a taxpayer’s net assets in excess of one billion dollars on such date.
5601. (4) “Phase-in cap amount” means an amount equal to 10 percent of the worth of a taxpayer’s net assets in excess of $10,000,000.00 at the end of the day on the last day of an applicable tax year.
[...]
5602. TAXATION OF UNREALIZED GAINS (a) Tax is imposed for each taxable year on resident individuals with net assets worth more than $10,000,000.00 at the end of the day on December 31 of the taxable year. A taxpayer shall be deemed to realize 50 percent of the gain or loss as though each asset owned was sold for fair market value at the end of the day on that date. A proper adjustment shall be made for assets previously subject to taxation under this section in prior years, pursuant to subsection (b) of this section. All other adjustments to the basis of a taxpayer’s assets shall be made prior to a partial deemed sale under this section. Any resulting net gains from a partial deemed sale, up to the phase-in cap amount, after accounting for losses carried forward, shall be recognized and included in the taxpayer’s taxable income for that taxable year.
Deductions and Credits
The withholding model referenced earlier differs from a basic wealth tax, such as the property tax, in that it allows the withholding to be used as a tax credit when financial assets are sold and capital gains are realized (Saez & Zucman, 2020). This tax credit could have a “withholding account” that carries forward until any of the taxpayer’s financial assets are sold and capital gains are realized (Saez et al., 2021). This way, there is no risk of double taxation, as these capital gains are only taxed once.
Similar to the withholding model, the ULTRA policy option would provide that any prepayment of a deferred wealth tax would generate a tax credit that could be applied against a future tax liability from the sale of a difficult-to-value asset (Galle et al., 2022). In order to take into account individual contributions to assets by wealthy individuals, the percentage of the government’s “stake” in assets that increase due to financial contributions could also be added to the tax credit (Galle et al., 2022).
Calculation Example: ULTRA Tax Credit
Let’s assume that a wealthy individual has difficulty valuing shares of a private company and signs an ULTRA agreement with the government. If, over time, the government builds up a notional equity interest of 10% of those shares and the wealthy individual buys an additional $50 million in that stock, then $5 million (10% of $50 million) could be applied as a tax credit when the stock is sold.
If, soon after, the wealthy individual sells their ownership in this private company for $200 million, then the government would be entitled to $15 million (10% of the $200 million minus the $5 million credit).
Tax Limit
There are many ways that a tax limit can be designed. For example, the French wealth tax provides a tax ceiling of 75%–85% of net taxable income (Garbinti et al., 2023). The phase-in example mentioned earlier includes an annual tax limit of 10% of the taxpayer’s net assets in excess of $10 million. And an academic proposal for a withholding tax on future capital gains proposes limiting the withholding to 90% of the potential federal capital gains tax, which would be accumulated over a nine-year period (Saez et al., 2021). See below for more on this model.
Decision Tree: Withholding Tax on Unrealized Capital Gains
Assuming a $50 million exemption threshold, a 37% federal income tax rate for the highest income tax bracket, and a withholding rate of 10%, then for tax year 1, the withholding calculation would be: 37% x 10% x $165.95 billion = $6.14 billion.
If all else stays constant (e.g., no sale or purchase of additional Amazon shares or change in market value), then Bezos would continue to pay $6.14 billion per year through tax year 9, at which point he would have paid $55.26 billion, which is 90% of the $61.4 billion he could have owed based on a 37% tax rate (after the exemption threshold).
If Bezos sells his shares after that, $55.26 billion in his withholding account would be credited against his realized gains to offset that capital gains tax. If, instead, he continues taking advantage of the “buy, borrow, die” scheme and leaves his Amazon shares to his heirs, then the withholding tax would never be credited back or refunded.
Adjusting the Cost Basis
To ensure that unrealized capital gains are not taxed twice, one policy option is to adjust the cost basis (i.e., the cost used to calculate gains/losses) of these assets based on deemed realized gains or losses. For example, 2024 VT HB 827 would increase the cost basis of assets with deemed realized gains by the amount of gains that are actually recognized, which is the lesser of 50% of total deemed capital gains or the cap amount plus any gains that were offset with the deemed capital losses. This basis increase is proportionally allocated among all assets with deemed capital gains based on their share of total gains. To ensure that deemed capital losses are not taken into account more than once, the bill provides for reducing the basis of these assets by the amount of their recognized deemed capital losses (Gamage, 2024).
Adjusted Cost Basis Example for Jeff Bezos
Going back to our example of a phased mark-to-market tax on Jeff Bezos:
In tax year 1, the lower amount from two calculations (tax limit calculation) results in $19.849 billion being added to Bezos’ taxable income.
Assuming that in the next tax year (tax year 2), Bezos does not sell or buy any additional shares, the value of Amazon stock stays that same, and his net worth holds constant, then the amount applied to his taxable income the previous year would be added to the cost basis in tax year 2:
Total deemed realized gains would be $146.151 billion ($166 billion – $19.849 billion), and 50% of deemed realized gains recognized = $73.076 billion.
Tax limit is 10% of net worth beyond $10 million, or 10% x ($198.5 billion – $10 million) = $19.849 billion.
The lower amount from these two calculations, $19.849 billion, would again be added to the taxable income and to the cost basis of the Amazon stock shares (for tax year 3). Eventually, all else being equal, the cost basis would become large enough to reduce the deemed and recognized realized gains to below the tax limit.
Tax Administration
While different state revenue agencies promulgate administrative rules to implement their state’s unique tax code, there may be additional lessons to learn regarding how to design strong reporting requirements and enforcement tools.
Reporting Requirements
In the French tax system, taxpayers were required to report their wealth tax based on January 1st of the reporting year (Garbinti et al., 2023). For example, if a wealthy taxpayer was filing income tax forms in 2023 for income earned in tax year 2022, they would also complete wealth tax forms for assets as of January 1, 2023 (not 2022). The French tax system provided both a regular tax form and a simplified form for individuals without exemptions or deductions, but a recent study found that simplified reporting may lead to more misreporting of wealth (Garbinti et al., 2023).
A mark-to-market unrealized capital gains tax could follow current tax reporting practices, in which financial institutions share information on assets directly with customers/taxpayers and some third-party reports are shared with the IRS (Saez et al., 2021). This would require filing a new tax form and reporting to the state tax administration both the purchase price and the fair market value of financial assets held by the very wealthy, in order to estimate the taxable value of these unrealized capital gains (Saez et al., 2021). IRS Form 8854, which is used to calculate the federal expatriation tax, is an example of a mark-to-market calculation. Bank valuation of financial securities used as collateral for loans made as part of the “buy, borrow, die” loophole could also be reported to the relevant state tax authority.
Legislative Examples: Tax Forms
An Illinois bill would require the state’s department of revenue to create or amend relevant tax forms, and the bill specified asset categories to include in these forms. A California bill with an ULTRA provision included additional reporting requirements that apply even if residents move to another state, as well as requirements placed on a deceased taxpayer’s estate.
(a) The Department of Revenue shall amend or create tax forms as necessary for the reporting of gains by assets. Assets shall be listed with (i) a description of the asset, (ii) the asset category, (iii) the year the asset was acquired, (iv) the adjusted Illinois basis of the asset as of December 31 of the tax year, (v) the fair market value of the asset as of December 31 of the tax year, and (vi) the amount of gain that would be taxable under this Act, unless the Department determines that one or more categories is not appropriate for a particular type of asset.
(b) Asset categories separately listed shall include, but shall not be limited to, the following:
(1) stock held in any publicly traded corporation;
(2) stock held in any private C corporation;
(3) stock held in any S corporation;
(4) interests in any private equity or hedge fund organized as a partnership;
(5) interests in any other partnerships;
(6) interests in any other noncorporate businesses;
(7) bonds and interest bearing savings accounts, cash and deposits;
(8) interests in mutual funds or index funds;
(9) put and call options;
(10) futures contracts;
(11) financial assets held offshore reported on IRS tax form 8938.
50310. (a) (4) If a taxpayer has initiated a LOUTCA in any prior year, until that LOUTCA has been reconciled and closed, the taxpayer shall annually complete and file any form or forms that shall be created by the Franchise Tax Board for the purposes of reporting any material transactions made with regard to the LOUTCA. These reporting requirements shall continue even if and after the taxpayer is no longer a resident and shall then be enforced as a legally binding contract with the state. Failure to file these annual forms shall be treated as a breach of contract and shall also be subject to the same penalties as failure to file income tax forms for residents who are required to file income tax forms. Upon the death of any taxpayer who has initiated a LOUTCA that has not been fully reconciled and closed, that taxpayer’s estate and assigns shall be required to reconcile the LOUTCA so as to fully liquidate the accumulated tax claims and to then pay all tax owed on those liquidated tax claims, treating these claims as an unpaid tax liability of the taxpayer owed to the state.
Enforcement Mechanisms
At the most basic level, the potential revenue from a wealth tax is simply: Tax base = total wealth × top wealth share × (1 − evasion rate) (Saez & Zucman, 2020). Minimizing evasion rates is critical to realizing the full benefits of a wealth tax.
The French wealth tax provided that if a wealthy individual is audited and found to be noncompliant with the wealth tax requirements, they may be required to amend their tax returns for up to the last 10 years, depending on the type of noncompliance issue found (Garbinti et al., 2023). A study looking at European wealth taxes found that tax evasion through the use of offshore accounts was a major detriment, along with weak enforcement due to heavy reliance on self-reported assets, and this study recommends the use of a common reporting standard for offshore assets (Piketty et al., 2023).
Legislative Examples: Penalties
Legislation in Washington State would impose a penalty of either 30% or 50% for understating asset valuations, depending on the level of understatement or misstatement. The bill would also require audits of a percentage of wealthy taxpayers, with the required minimum ramping up from 10% in 2025 to 20% in 2027. Legislation in California would add claims, records, and statements made to comply with the proposed wealth tax’s reporting requirements to the state’s false claims act, which could result in civil action and treble damages for costs that the state incurs to recover penalties or damages when a false or fraudulent claim is made.
Sec. 10. SUBSTANTIAL WEALTH TAX VALUATION UNDERSTATEMENT PENALTY IMPOSED. (1) Except as otherwise provided in this section, if any portion of an underpayment of tax due under this chapter is due to a substantial wealth tax valuation understatement, there must be added to the tax an amount equal to:
(a) In the case of any substantial wealth tax valuation understatement that is a gross wealth tax valuation misstatement, 50 percent of the portion of the underpayment due to the valuation understatement; or
(b) In all other cases, 30 percent of the portion of the underpayment due to the valuation understatement.
(2) The penalty imposed under subsection (1) of this section does not apply unless the portion of the underpayment attributable to substantial wealth tax valuation understatements for the calendar year exceeds $5,000.
(3) The penalty imposed in this section is in addition to any other applicable penalties imposed under this chapter or chapter 82.32 RCW on the same tax due, except for the penalty imposed in RCW 82.32.090(7).
(4) For purposes of this section, the following definitions apply:
(a) “Gross wealth tax valuation misstatement” means the fair market value of any financial intangible assets reported on a return required by this chapter is 40 percent or less of the amount determined to be the correct amount of such fair market value.
(b) “Substantial wealth tax valuation understatement” means the fair market value of any financial intangible assets reported on a return required by this chapter is 65 percent or less of the amount determined to be the correct amount of such fair market value.
Sec. 11. ENFORCEMENT. Beginning in calendar year 2025, to the extent that sufficient funds are specifically appropriated for this purpose, the department must initiate audits of at least 10 percent of individuals who are registered with the department to pay the tax imposed in this chapter, increasing to 15 percent in calendar year 2026, and 20 percent in calendar year 2027 and thereafter.
This Washington State bill would also add the following language to the statutory section on tax avoidance:
Sec. 16. RCW 82.32.655 and 2010 1st sp.s. c 23 s 201 are each amended to read as follows:
[...]
(d) Arrangements through which a taxpayer attempts to avoid tax under chapter 84A.--- RCW (the new chapter created in section 21 of this act) through intentional deception, such as by concealing assets or evidence of the location of the taxpayer’s domicile in this state, by transferring assets prior to December 31st when the taxpayer effectively retained control of the assets, or by effectively converting taxable assets into nontaxable assets prior to December 31st when the taxpayer engages in a substantially offsetting transaction. This subsection (3)(d) does not apply to substantial wealth tax valuation understatements subject to the penalty in section 10 of this act.
12651. (f) (1) This section shall apply to claims, records, or statements made under Part 27 (commencing with Section 50300) of Division 2 of the Revenue and Taxation Code only if the damages pleaded in the action exceed two hundred thousand dollars ($200,000).
(2) For purposes of this subdivision only, “person” has the same meaning as that term is defined in Section 17007 of the Revenue and Taxation Code.
(3) The Attorney General or prosecuting authority shall consult with the taxing authorities to whom the claim, record, or statement was submitted prior to filing or intervening in any action under this article that is based on the filing of false claims, records, or statements made under the Revenue and Taxation Code.
(4) Notwithstanding Section 19542 of the Revenue and Taxation Code or any other law, the Attorney General or prosecuting authority, but not the qui tam plaintiff, is hereby authorized to obtain otherwise confidential records relating to taxes, fees, surcharges, or other obligations under the Revenue and Taxation Code needed to investigate or prosecute suspected violations of this subdivision from state and local taxing and other governmental authorities in possession of such information and records, and such authorities are hereby authorized to make those disclosures. The taxing and other governmental authorities shall not provide federal tax information without authorization from the Internal Revenue Service.
(5) Any information received pursuant to paragraphs (3) and (4) shall be kept confidential except as necessary to investigate and prosecute suspected violations of this subdivision.
(6) This subdivision does not and shall not be construed to have retroactive application to any claims, records, or statements made under the Revenue and Taxation Code before January 1, 2024.
Withholding Model Enforcement
The unrealized capital gains tax withholding model could potentially reduce the risk of undervaluing financial assets, as this valuation could provide a future tax credit (Saez & Zucman, 2020). Enforcement could be supported by requiring financial institutions and private businesses to disclose relevant purchase prices and market value estimates, as well as valuing financial assets separately from business operations and assets held indirectly through private businesses, which could limit the risk of tax avoidance through shell corporations (Saez et al., 2021).
Another major benefit of this model for state tax collection is that it reduces “wealth flight,” which is more likely after retirement, as wealthy individuals would not be able to avoid paying taxes on their unrealized capital gains during “productive years” and then retire to a state with no income tax to avoid paying taxes on realized capital gains (Saez et al., 2021). Additionally, the tax withholding allowance would presumably only be useful for individuals who realize their capital gains in a state with a similar withholding tax system (Saez et al., 2021). This may mean that an interstate agreement or compact will become an important tool to avoid double taxation and to support cross-state retirement/establishment of residency.
Note on Wealth Flight
“It is possible that the tax could encourage successful entrepreneurs to leave early to avoid the tax. For example, a [California] billionaire might decide to move to Florida now to avoid paying the withholding annual 1% tax on his accumulated gains (instead of moving to Florida later before realizing capital gains). However, it is difficult to move while you are still running a business (and moving the headquarters of the business is much more difficult). Therefore, mobility risk is most important for retired billionaires.” (Saez et al., 2021)
Large numbers of households — including high-income households — move into higher-tax states every year.
Highly educated and high-income households in higher-tax states are not disproportionately moving to no-income-tax states.
State income tax cuts for high-income people haven’t meaningfully boosted in-migration.
State income tax increases for wealthy people have not led to substantial numbers of them moving to lower-tax states, certainly not enough to result in eroding more than a small fraction of the revenue the tax increases generated.
The most comprehensive nationwide study of millionaire migration ever conducted concluded that “millionaire tax flight is occurring, but only at the margins of statistical and socioeconomic significance.”
Conclusion
A state tax on unrealized capital gains is a relatively new proposal in the U.S., but not globally, and academic experts have analyzed the strengths and weaknesses of various wealth tax models and developed innovative mechanisms to address some of the greatest challenges to practical implementation and political viability. These lessons can provide state policymakers with a starting point for policy design, but as “laboratories of democracy,” state legislatures should prioritize both collaborating with their communities and fostering a spirit of experimenting with, evaluating, and improving their state’s tax revenue laws.
The State Innovation Exchange (SiX) exists to advance a bold, people-centered policy vision in every state in this nation by helping vision-aligned state legislators succeed after they are elected. If you are working to strengthen our democracy, fight for working families, advance reproductive freedom, defend civil rights and liberties, or protect the environment, reach out to helpdesk@stateinnovation.org to learn more about SiX’s tailored policy, communications, and strategy support and how to join this network of like-minded state legislators from across the country.
Academic References
Addo, F. R. & Darity, W. A. (2021). Disparate recoveries: Wealth, race, and the working class after the great recession. The Annals of the American Academy of Political and Social Science, 695(1), 173–192. https://doi.org/10.1177/00027162211028822
Gamage, D. (2024). Testimony on Vermont H. 827: An act relating to applying personal income tax to unrealized gains. University of Missouri School of Law Legal Studies Research Paper, No. 2024-02. https://ssrn.com/abstract=4726478
Garbinti, B., Goupille-Lebret, J., Munoz, M., Stantcheva, S., & Zucman, G. (2023). Tax design, information, and elasticities: Evidence from the French wealth tax. NBER Working Paper Series. https://gabriel-zucman.eu/files/GGMSZ2023.pdf
McCaffery, E. J. (2019). The death of the income tax (or, the rise of America’s universal wage tax). USC Law Legal Studies Paper, No. 18-26. http://dx.doi.org/10.2139/ssrn.3242314
The enactment of the Fair Labor Standards Act (FLSA) in 1938 marked the passage of the first federal standards for child labor in the U.S., prohibiting the long hours, dangerous jobs, and abusive practices that many children suffered at the time. Now, nearly nine decades later, state legislatures, spurred by political operatives working on behalf of deep-pocketed corporate interests, are the epicenters of a national campaign to turn the clock back on child labor protections.
Since 2021, at least 61 bills to roll back child labor protections have been introduced in 29 states, and at least 17 bills have been enacted in 13 states. The proposals, some of which would directly conflict with federal standards, include provisions that would repeal work permit requirements, extend work hours, legalize employment in hazardous occupations, allow children to be paid less than the state minimum wage, lower the minimum age for alcohol service, and preempt the passage of stricter child labor protections at the local level. Without adequate federal or state enforcement capacity, the recent onslaught of legislative activity to bring back 19th-century child labor standards promises to intensify a growing national crisis of child labor violations, especially among migrant youth.
State lawmakers and advocates have the power to organize and push back against these coordinated attacks and to put forward a different vision for the future where labor policies safeguard the safety, well-being, and education of children. This publication is intended to serve as a resource to legislators and state advocates in resisting efforts to deregulate child labor protections. It offers policy options that can strengthen labor protections for young workers. A stronger framework for child labor standards at the state level should consider the following:
Enhancing child labor protections. States can and should establish labor protections that go above and beyond federal standards for young workers. Examples include time and hour restrictions for 16- and 17-year-olds, prohibitions on hazardous occupations, rest or meal break requirements, work permit requirements, repealing youth subminimum wage laws, and strengthening protections for children in agricultural work.
Enhancing enforcement and penalties. States should adopt an enforcement strategy that maintains a credible ability to enforce against violations and includes a penalty regime that provides effective deterrence.
State lawmakers can establish strong civil and criminal penalties, including minimum penalties and damages payable to workers, in addition to enhanced penalties for egregious violations.
Legislators can also enhance enforcement by establishing anti-retaliation protections, extending the statute of limitations on violations, expanding agency enforcement powers, and boosting enforcement capacity, particularly by adding language and cultural capacity to appropriately support migrant children.
State legislators can consider strategies that support enforcement on behalf of the state, like community enforcement programs, private attorneys general laws that authorize aggrieved employees to bring enforcement actions on behalf of the state, or dedicated grant funding to local prosecutors to support labor enforcement actions.
Lawmakers can ensure that children have appropriate legal remedies when they are harmed by child labor violations by ensuring that injured or killed workers are not limited to workers’ compensation as an exclusive remedy and by establishing a private right of action.
Extend liability to all entities that profit from child labor. State lawmakers should modernize child labor protections to account for 21st-century business structures that often allow the most powerful entities to evade accountability. Examples include laws that hold lead corporations responsible for violations committed within their supply chains and laws that establish joint liability for franchisors and franchisees.
Establish public procurement compliance requirements. States can set a standard for strict compliance with child labor protections through the procurement process by requiring contractors to disclose child labor violations and maintaining compliance with child labor protections as a condition for eligibility for public contracts.
Support education, outreach, and service coordination efforts. Legislators can also enable improved enforcement outcomes by supporting education and outreach efforts that ensure that children and their families are adequately informed of their rights under the law and by facilitating coordination among labor officials, public education systems, social services, and immigrant legal services to ensure that investigations of violations do not leave families without access to material and legal support.
The scheme to deregulate child labor state by state is inseparable from attacks on workers’ rights, safety net programs that help families get back on their feet during hard times, the right to an honest and quality education, a fair tax system where wealthy corporations pay what they owe, and our freedom to vote and our right to fair representation. Altogether, these conjoined efforts—driven by insatiable corporate greed and bolstered by outsized elite influence over our democracy—paint a bleak future of an endless race to the bottom for cheap labor, enshrined by the exploitation of children at the expense of their health, safety, and education.
Introduction
In recent years, state legislatures have been the focus of a national operation to repeal laws that protect young people’s health, safety, and educational rights. The campaign to drag labor protections back in time to the 19th century is part of a sweeping, multi-issue effort to further concentrate corporate power, undermine worker rights, and dismantle government regulation, all while cementing wealth inequality by stratifying access to public education and tearing down anti-poverty programs. Since 2021, at least 61 bills to weaken child labor protections have been introduced across 29 states, including 17 bills that have been enacted in 13 states.
The ultimate intent of the corporate lobby is clear: to pave a path to national deregulation of child labor, one state at a time. State lawmakers have the power to put a stop to the plot to build an economy that allows businesses to profit on the backs of children, even in the most dangerous jobs. This publication is intended to serve as a resource to legislators and advocates in responding to the ongoing efforts in state capitols to deregulate child labor. In addition to examining the industry-backed actors behind the corporate conspiracy to roll back child labor protections, the publication outlines the types of regressive legislation that states have considered and passed in recent years and offers potential policy options that legislators may consider to further strengthen state protections for young workers.
History Repeats Itself: A Look Behind the Curtain of the Campaign To Roll Back Child Labor Protections
In the years following the proposal of a constitutional amendment authorizing Congress to regulate child labor in 1924, a new organization called the Farmers’ States Rights League (FSRL) distributed over a quarter-million pieces of literature opposing the amendment, spreading false claims that children would be prevented from doing chores around the home and family farm. The propaganda spread through half-page advertisements in small-town newspapers, leaving readers with the misguided impression that the campaign was funded organically by a group of farmers who came together in opposition to the amendment.
In reality, the FSRL was operated by David Clark, a frontman for wealthy Southern textile factory bosses—an industry that thrived on child labor—to create the facade of public resistance to the amendment in rural America. Clark, a virulent white supremacist who frequently railed against integration as the publisher of the influential Southern Textile Bulletin, was also the mastermind behind a litigation strategy to stonewall new child labor protections. His efforts, which included selecting a friendly federal judge and cajoling young cotton mill workers to serve as plaintiffs in lawsuits he paid for, resulted in the U.S. Supreme Court striking down two newly enacted federal child labor protections. One of the plaintiffs handpicked by Clark, when interviewed by a reporter years later, reflected: “I’d been a lot better off if they hadn’t won it. Look at me! A hundred and five pounds, a grown man and no education.”
While the proposed amendment was never ratified, Congress eventually enacted the Fair Labor Standards Act (FLSA) in 1938, prohibiting children from being employed in certain types of hazardous work, establishing a minimum age of 16 for most types of work, and limiting the number of hours and the time of day that children are allowed to work to protect school attendance. Nearly a century later, a different set of actors, funded by the newest generation of billionaire industrialist barons, are playing the same cast of characters in another astroturfing production to fabricate the illusion of widespread support for policies that only serve to line the pockets of the wealthy through increasingly dangerous child labor.
Industry Fronts: Agribusiness, the Foundation for Government Accountability, and the Opportunity Solutions Project
Agricultural industry groups continue to be outspoken proponents of weakening child labor protections. In the same model as the FSRL, they point to these protections as being burdensome for family farmers when, in truth, these groups represent multinational agribusiness corporations. Groups opposing a proposed federal rule to increase child protections in the FLSA in 2011, for example, included some of the biggest actors in the industry, such as pesticide trade group CropLife America, the National Cotton Council, and the American Farm Bureau Federation (AFBF). The AFBF, in particular, was founded in 1919 as a contemporary of the FSRL but has remained a powerful lobby group in the century since—calling itself “the voice of agriculture” while representing large agribusiness interests. In addition to advocating for weaker child labor protections, the AFBF supported the repeal of both the Voting Rights Act of 1965 and the Affordable Care Act while consistently pressing for policies that harm the independent family farmers it claims to represent.
Other proponents of child labor rollbacks in statehouses across the country reflect a similar array of lobbyists and trade associations for other businesses and industries that stand to benefit most from child labor, including the restaurant, hospitality, and retail industries. During a hearing on a bill to repeal work permits in Arkansas, the legislative sponsor acknowledged that the legislation came from a Florida-based organization called the Foundation for Government Accountability (FGA). At the same time, emails obtained by reporters revealed that similar bills were sent by FGA lobbyists to Florida and Missouri lawmakers.
Reflecting on its work during the 2021 legislative session in states across the country, the FGA boasted in its annual report that thanks to the expansion of its “Super State strategy, which involves doubling down in key states to drive national change with big reforms,” Arkansas legislators enacted 48 “FGA reforms,” while Florida had implemented 26 of the organization’s solutions. Just two years later, lawmakers in Arkansas and Florida, in addition to two of the newest FGA Super States, Iowa and Wisconsin, passed bills to weaken child labor protections.
The FGA and OSP are funded by a number of ultra-wealthy industrialists who have funneled billions into a vast network of organizations to do the bidding of large corporations and conservative extremists. Some known funders of the FGA and OSP are also behind other industry investments to capture judicial and legislative power:
The similarities between the tactics of modern pro-child labor groups and their forebears are striking: front organizations are financed by a wealthy network of elites to create the pretense of citizen-driven campaigns for policies that make benefactors even more profitable in their industries. When paired with the ongoing crusade to push our democracy, state by state, into crisis, policies designed to enact economic oppression on the most vulnerable workers promise to ensure that the power to hoard wealth and opportunity remains a feature of our nation’s laws for generations to come.
Federal and State Enforcement Capacity is Insufficient Amidst Increased Violations and Conflicting State Laws
The Supremacy Clause of the Constitution provides that federal law takes supremacy over conflicting state laws. While states may enact laws that provide legal protections above federal law, they may not lower the “floor” set by federal law. State legislatures have a long tradition of establishing and enforcing higher labor standards for their residents, including establishing some of the country’s first child labor protections a century before the passage of the FLSA.
States that roll back state child labor standards are actively diminishing their important, long-standing roles in enforcing child labor protections, leaving more and more of the enforcement burden to an already short-staffed federal Department of Labor (DOL) at a time when employer violations are sharply increasing. Weakening state standards signals to unscrupulous employers that child labor violations are less likely than ever to be investigated in a certain state while creating new confusion, even for well-intentioned employers, about what is and is not legal, increasing the likelihood of additional violations.
During the 2023 legislative session, federal DOL officials responded to a request from Iowa lawmakers regarding a bill (2023 IA SF 542), which has since been enacted into law, to confirm that several provisions were inconsistent with federal law. The DOL more recently alerted employers that they remain legally obligated to comply with federal child labor protections rather than newly enacted and weaker state laws, reminding employers that “[w]here a state child labor law is less restrictive than the federal law, the federal law applies. Where a state child labor law is more restrictive than the federal law, the state law applies.”
Despite the legal impotence of some provisions contained in new state child labor laws, they are deliberately intended to introduce confusion to the existing regulatory framework, take advantage of a vastly under-resourced and understaffed federal labor enforcement agency, and heighten conflicts between state and federal standards to build a case for lowering standards nationwide. The ultimate goal, as the FGA outlined in a recent report, is to “open the door to federal regulatory reform” by getting “enough states to successfully implement a reform.”
Proponents of weakening child labor protections frequently trot out feel-good stories suggesting that the rollbacks will open opportunities for teenagers working at the local movie theater or grocery store to save up for a prom dress when, in reality, these types of jobs are already fully legal options for teens as young as 14 in all states. Deregulation is instead aimed at stripping long-standing safety and scheduling standards that protect the health and education of children. Removing these guardrails will have the most dire, life-threatening consequences for children who are working to survive in some of the most dangerous and hidden jobs in our economy. This is made all the more urgent by a recent increase in unaccompanied migrant children driven from their home countries by economic desperation. State legislatures are the most important stopgap today for preventing the continued abuse, serious injury, and death of children in the workplace.
Compounded by violence and the disastrous effects of climate change, the economic fallout from the pandemic pushed many in Central America into a severe economic crisis. Many families facing extreme hunger and poverty had little choice but to send their children to the U.S. through a narrow opening in an otherwise broken immigration system that, until recently, closed the southern border to unauthorized arrivals and asylum seekers, except for children.
Nearly 350,000 unaccompanied children were released by federal officials in a three-year period between 2020 and 2023—almost a 180% increase from the previous three years. Whereas the majority of unaccompanied minors in years past were primarily released to parents already living in the country, today, only one-third are sponsored by parents, with the remainder being sent to relatives, acquaintances, or strangers. Unaccompanied children are held temporarily at shelters under the care of the U.S. Department of Health and Human Services (HHS) while caseworkers vet sponsors to identify red flags for potential trafficking, such as sponsors that have claimed responsibility for dozens of unrelated children.
About one-third of unaccompanied children who are identified as high-risk continue to receive case management services after release. In most instances, children are released to sponsors with the number of a national hotline and receive a phone call from federal officials within a month of release. In 2022, HHS reported not being able to contact one-third of minors in the month after their release to sponsors, while trafficking reports to the national hotline have increased by 1,300% in just five years.
Child Labor Violations Are Widespread and Largely Unchecked
The stories gathered from interviews with migrant children themselves, as well as the caseworkers, teachers, and community members around them, all bear strikingly repetitive refrains. Upon arriving in the country alone and without work permits, unaccompanied migrant children, often saddled with debt from their journey and with the obligation to support families back home, inevitably end up filling some of the most undesirable jobs that are often outsourced and persistently vacant due to the refusal of corporations to pay fair wages. These children frequently end up dropping out of school or never enrolling at all.
Though federal law prohibits children from being employed in many of these roles, employers frequently look the other way, as was in the case of a 13-year-old worker who presented documents that identified them as a 30-year-old. Even when multimillion-dollar corporations are caught in a federal investigation, the maximum civil penalty for child labor violations—less than 1% of the penalty for insider trading—is trivial to those corporations when balanced against the profits generated by ignoring labor protections. Some of the most egregious violations have been at worksites that are within the supply chain of major household brands like Tyson, Hyundai, and General Mills, which are insulated from liability by layers of subcontractors and third-party agencies.
Over and over, reporters and federal investigators have laid bare the widespread nature of child labor violations in today’s economy. Each story below, alongside many more, shares similar themes of exploitation and willful ignorance by employers, who often face little to no accountability, even in cases involving serious injury or death:
In rural Virginia, a 14-year-old who would finish his overnight shift in a Perdue chicken slaughterhouse 20 minutes before getting on the bus to school was maimed when a conveyor belt caught his arm. Without full function restored to his arm, which still requires at least three additional surgeries, he has no choice but to focus on school—a rare opportunity for unaccompanied migrant children—even as interest accrues on the debt that his family took on to send him to his adult cousin in Virginia. When notified of the maiming incident, OSHA officials handed the investigation to officials in Virginia, who permitted the company to complete a “self-inspection,” resulting in no citations for the company and no reference to the worker’s age.
Reporters recently interviewed more than 100 child roofers working in nearly two dozen states, painting a bleak picture of an industry that relies on children as young as 10 to fill a workforce shortage. The stories are nauseating: a 15-year-old who fell to his death in Alabama with a crew of nine people and only six harnesses; a 15-year-old in Florida who slipped and burned his body when he fell into a vat of tar; a 17-year-old in Louisiana who was electrocuted to death while operating a forklift for the first time; and Antoni, a 15-year-old who fell 30 feet onto concrete from the roof of a South Carolina beach house. The sheer asymmetry between the deadly risks that children take on and the consequences that their employers face is breathtaking—of the three deaths referenced in the article, none has resulted in any child labor fines. As for Antoni, who woke up from a three-month coma and was unable to access rehabilitation services to address memory loss and mobility issues without health insurance, three tiers of roofing contractors each contend the other is liable for workers’ compensation, and only one has been fined $500 by state labor investigators.
A 2022 DOL investigation found at least seven underage workers, including two brothers aged 13 and 15, illegally employed by a Hyundai manufacturer in Alabama through a third-party staffing agency. The brothers, who were also living in a house owned by the president of the staffing agency, reported that one of the intermediaries that recruited them also led them to believe that the entity had the power to deport them. The manufacturer was fined just $30,000; Hyundai was shielded from legal liability by a complex web of suppliers and staffing agencies and is set to receive $2.1 billion in state and local tax breaks and incentives in Georgia.
A massive federal DOL investigation found at least 102 teens working in violation of federal law across 13 facilities in eight states for Packers Sanitation Services Inc. (PSSI), a contractor that describes itself as the leading sanitation company for meatpacking plants. The investigators estimated there were at least five times as many children employed illegally based on observations. According to court records, the children handled high-pressure hoses, scalding water, industrial solutions that caused chemical burns, and power-driven machines like 190-pound saws. Meanwhile, PSSI, which is owned by Blackstone, the world’s largest private equity firm controlling over $1 trillion in wealth, paid a $1.5 million civil fine, or 1% of the company’s cash on hand, and faces no criminal charges.
At one Southern California poultry plant, federal investigators found children as young as 14 deboning chickens and operating forklifts outside of allowable work hours. The investigation also revealed that the processor, which supplies poultry to brands like SYSCO Corp. and Kroger, committed wage theft violations by paying workers less than minimum wage and refusing to pay overtime wages while retaliating against workers who cooperated with the investigation. In total, the poultry processor was ordered to pay $3.5 million in back wages and damages to workers, in addition to over $201,000 in civil penalties. The owner of the plant was recently the subject of an investigation by state labor officials that resulted in a $1.47 million settlement, including over $900,000 in wages stolen from 300 workers.
Federal regulators at the WHD announced an investigation of three McDonald’s franchisees that identified 305 children working in violation of child labor laws—including two 10-year-olds who worked as late as 2 a.m. at a Louisville restaurant. In total, the franchisees were assessed over $212,000 in civil penalties for violations and recovered nearly $15,000 in back wages and damages from one franchisee who failed to pay overtime wages. Since 2021, McDonald’s franchisees have been assessed over $577,000 in civil penalties for violations involving 825 minors. Franchise agreements with brands like McDonald’s are often vague when it comes to compliance with labor laws, to limit the brand’s liability exposure.
A recent OSHA investigation concluded that Mar-Jac Poultry, a Mississippi poultry processing plant, “disregarded safety standards,” resulting in a fatal incident where a 16-year-old was pulled into a machine that he was sanitizing in July of 2023—an occupation prohibited under federal child labor laws. Mar-Jac Poultry was cited with 17 safety violations and fined $212,646; the company is still in the process of contesting a penalty of $27,306 from another fatal incident in 2021. A nonprofit that owns a three-quarters stake in the parent company of the poultry processor, Mar-Jac Holdings, recently reported that its ownership stake in the holding company was equal to over $235 million in assets in 2022.
On its own, the idea of allowing children to work full-time or on graveyard shifts while attending school, to operate dangerous industrial equipment sharp enough to butcher cattle, to work in a bar at the age of 14, to toil in fields while inhaling toxic pesticides at 12, or to handle caustic cleaning solutions while wearing protective gear several sizes too large for less than minimum wage and without oversight is shocking and dangerous. But when taken together with the other priorities of the shadowy network of industry-funded groups that have cloaked their campaign to deregulate child labor as simply a matter of cutting “red tape,” the effort presents an existential threat to the future that most of us envision for our children.
Given the improbability of federal action on child labor, even in the face of rising violations, new conflicting state laws, and lack of federal enforcement capacity, state lawmakers have a central role to play in protecting the health and safety of children in the workplace. In addition to fighting back against continued child labor rollbacks, legislators can strengthen child labor standards and boost enforcement capacity at the state level.
The Campaign To Weaken Child Labor Protections
Since 2021, at least 61 bills to weaken child labor protections have been introduced across 29 states:
17 bills were enacted in 13 states—Alabama, Arkansas, Illinois, Iowa, Kentucky, Michigan, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Tennessee, and West Virginia. Two additional bills were enacted in Michigan and Wisconsin but were vetoed by the governor in each state.
29 bills (and counting) are currently pending in 19 states—Alabama, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, and Wisconsin.
Recent legislation to weaken protections for children in the workforce has generally included some combination of the following provisions.
Eliminating employment certification requirements. In most states, minors of certain ages must be issued work certificates, sometimes referred to as work permits, in order to be employed. Employment certificates, issued by either state labor officials or school officials, typically document the minor’s work and proposed schedule, affirm parental consent, and verify the child’s age. Many recent bills include proposals to eliminate work permits, bypassing parents while also eliminating documentation that can be used in investigations of potential violations and that serves as notice to children, families, and employers of state child labor laws.
Extending work hours. Federal law limits the times of day and number of hours that 14- and 15-year-olds may work: outside of school hours, no more than 3 hours on a school day, no more than 8 hours on a non-school day, no more than 18 hours during a week when school is in session, no more than 40 hours during a week when school is not in session, and between 7 a.m. and 7 p.m. (or 7 a.m. to 9 p.m. between June 1 and Labor Day). Some states additionally have more restrictive limits on the number of hours or times of day that children are allowed to work, including guidelines for the employment of 16- and 17-year-olds enrolled in school. Several states are contemplating changes to their laws that would increase the number of hours that children are permitted to work on a daily or weekly basis or allow children to work later on school nights—even in violation of federal law, in the case of at least one bill (2023 IA SF 542) passed in Iowa.
Expanding types of permissible hazardous employment. Under federal law, the Secretary of Labor is authorized to identify jobs that 14- and 15-year-olds are permitted to do. Any job not expressly identified by the Secretary of Labor is prohibited, and the Secretary of Labor additionally identifies a set of jobs that are expressly prohibited for 14- and 15-year-olds. Federal law additionally prohibits the employment of children under age 18 in occupations identified by the Secretary of Labor to be especially hazardous based on injury and fatality data, which currently includes 17 occupations. In violation of these standards, some recent bills proposed by state legislators would authorize employers to hire children in hazardous industries like construction (2023 MN SF 375/HF 260) or to operate power-driven industrial machinery (2022 IA SF 2190).
Establishing a subminimum wage. Federal law allows employers to pay young workers and students subminimum wages and excludes occupations often held by youth. Some states have considered bills to establish a subminimum wage for workers under a certain age, below the minimum wage required by federal or state law.
Lowering alcohol service age. The minimum age to serve alcohol in most states is at least 18 years, but in recent years, pushed by industry lobbyists, several states have enacted or considered bills to lower the minimum age to serve alcohol, with one proposal in Wisconsin (2023 WI AB 286) contemplating a minimum age of 14.
Weakening protections for homeschooled children. State laws vary regarding homeschool accountability and oversight. In some instances, homeschooling parents are not required to monitor their child’s academic progress or record it in any way. State deregulation of child labor laws may include further loosening of homeschool oversight, or take advantage of already weak regulations, to make it completely legal for a child’s education to be effectively abandoned. One proposal in Florida (2024 FL HB 49) explicitly allows homeschooled children to work during school hours.
Preventing local governments from passing stronger child labor protections. Local communities should have the power to develop policies that reflect the values and needs of the people living there. Some states are also considering child labor legislation that would block local policies that strengthen child labor protections above a state standard, expanding a longer-standing and troubling pattern of state interference with local governments’ ability to strengthen labor standards.
See Table 1 for a summary of legislation to weaken child labor protections that have been considered since 2021.
Strategies for Organizing Against the Rollback of Child Labor Protections
In organizing against the campaign to deregulate child labor, state legislators should consider the following strategies:
Center people. The people most impacted by these proposals should be the center of our work. Organize with community groups, parents, and children impacted by these laws. Worker centers, farmworker associations, student groups, and labor unions are valuable partners in public education, media engagement, legislative strategy, and coalition-building.
Build coalitions. It is important to partner with advocacy on the ground. In addition to worker centers, farmworker associations, student groups, and labor unions, consider public educators and state public education advocates, faith organizations, and anti-poverty organizations as partners. Small businesses and responsible employers (for example, unionized construction contractors who take pride in maintaining high standards for safety and training) can also be key allies.
Name opponents. Effective campaigns have a clearly identified and tangible opponent. Name who is financing these campaigns, as well as their financial contributions to lobbying and elections. This includes the FGA and their key financier billionaire Dick Uihlein, as well as the industry trade associations supporting these bills such as the state Chamber of Commerce, state Retail Federation and Restaurant Association, and the brand-sensitive corporations that make up their membership.
Paint the big picture. Be clear about who is funding this campaign, the history behind this effort, and the interconnectedness between efforts to privatize public education while simultaneously rolling back child labor protections. These laws are about denying young people the freedom to decide their futures in exchange for exorbitant corporate profits.
Use research and data. This report highlights research on the families most impacted by these laws, the deadly dangers associated with child labor, and the impact rolling back child labor has on overall worker wages, benefits, and safety. It is also important to understand the current exemptions in your state law, as well as federal law, in the specific industries the bill impacts. Gathering data on youth employment, high school completion, injury and fatality rates for young workers, and federal and state violations of child labor laws can also help to illustrate the realities of young workers in the economy. This helps debunk myths pushed by proponents, such as that these bills are simply about young people learning new skills or that they align with and do not violate federal law.
Engage with unlikely allies. As noted, industry trade associations such as the Chamber of Commerce and Retail Federation are generally in support of these bills. However, individual companies may oppose them and can be invited in as allies in this effort. There may also be a need for public pressure campaigns to secure opposition from such unlikely allies.
Engage with the media in coalition. Engaging the media on these bills in collaboration with partner organizations and coalitions is an important tactic to educate and organize the public. This includes traditional and nontraditional media, as well as non-English-speaking outlets.
Learn from peers in other states. The campaign to roll back child labor protections is a national campaign rooted in the states; it is important that we don’t operate in state silos but instead learn from peers across the country facing the same legislation. Tools like amendments, questions for the bill sponsor, debate, and public testimony are already publicly available in many states and critical in building public opposition to these bills. State Innovation Exchange can support these efforts.
Table 1. State Child Labor Legislation
Note: This table summarizes the provisions of state legislation related to child labor identified by the authors as of February 9, 2024. The status of each bill reflected in this table may not reflect its current status.
Opportunities To Strengthen Child Labor Protections
State lawmakers have the power to take immediate action to protect young workers against the staggering uptick in child labor violations, especially among children working in dangerous industries. The following sections include examples of provisions that lawmakers may consider in developing a stronger framework for child labor protections in their states, drawn from bills that have been considered at the federal and state levels. In addition to legislation specific to child labor, this section also includes enforcement approaches from other areas of labor law that may be effective against child labor violations.
See Table 1 for a summary of bills referenced in the following sections, in addition to other bills with similar provisions.
Enhancing Labor Protections
State lawmakers have the power to counteract the spread of child labor deregulation by ensuring that state-level protections continue to prioritize the health, safety, and education of young workers. At a minimum, legislators in states where child labor protections are weaker than the FLSA should raise state standards to align with federal requirements.
Establish labor protections for children that exceed federal standards.Federal child labor standards do not include time and hour restrictions for 16- and 17-year-olds, establish rest or meal break requirements, or require work permits for youth to be employed. Many states already have time and hour restrictions or occupational prohibitions that provide additional protections for young workers beyond what is required in the FLSA. Missouri lawmakers are considering a bill (2024 MO HB 1536) that would prohibit overnight shifts for 16- and 17-year-olds on school nights. In Michigan, where existing law already prohibits overnight shifts for 16- and 17-year-olds except if a deviation is granted by the state labor agency, legislators have introduced a bill (2023 MI HB 4932) that would narrow the circumstances in which a deviation may be granted to exclude certain hours or occupations that are “hazardous or injurious to the minor’s health or personal well-being.” Additionally, while most states already require that a work permit be issued to minors for employment, such requirements do not apply to all ages of minors or all occupations, and in most states, the permit includes no process for verifying the ages of minors.
Repeal exceptions that allow minors to be paid less than minimum wage. In addition to increasing the state minimum wage for all workers, lawmakers can ensure that young workers are paid the same as their adult co-workers for performing the same work. Legislators in the 34 states and the District of Columbia, where state law allows subminimum wages or excludes youth from minimum wage protections, can enhance protections for young workers by repealing subminimum wage laws. Rhode Island lawmakers are considering a bill (2024 RI H 7172) that would repeal provisions of existing law that allow some minors under the age of 19 to be paid less than the state minimum wage.
Much of the progress that has been made to improve conditions for farmworkers, including children, has been the result of decades of sustained organizing by farmworkers and their allies across the country. Some of these efforts have yielded legally binding codes of conduct between farmworkers and employers, which prohibit child labor and provide other important standards for worker safety and dignity. The Fair Food and Milk With Dignity Codes of Conduct are two models; these may offer inspiration for policy change.
Lawmakers can bring protections for farmworkers into the 21st century by raising state standards to minimize the risks that children face in agricultural work.
Limit the employment of children in agricultural work. Some states have already raised the minimum age for farmwork above the federal minimum for employment during and outside of school hours or under other specific circumstances, such as migratory labor. At the federal level, the Children’s Act for Responsible Employment and Farm Safety (CARE) Act (2023 US HR 4046) would align the minimum age and work hour standards for agricultural work with that of all other industries. In New York, lawmakers previously considered a bill (2022 NY A 9235) that would have raised the minimum age for agricultural labor to 16 and established new civil penalties for violations of oppressive agricultural child labor. Under the bill, a violation resulting in serious injury, serious illness, or death would be punishable by a penalty between $15,000 and $60,115 and/or five years of imprisonment, with the penalties doubling in instances where such violations are repeated or willful.
Establish stronger protections for the most hazardous types of farmwork. State lawmakers may also consider establishing new protections that apply to the most serious hazards that children face in agricultural work. The federal CARE Act (2023 US HR 4046), for example, would authorize the Secretary of Labor to create new regulatory guidelines for pesticide exposure for children in farmwork. Legislators in Virginia (2022 VA HB 876) recently considered a bill that would have prohibited the employment of a child under the age of 18 in any work involving direct contact with tobacco plants or dried tobacco leaves, which are known to be a significant occupational health risk for children.
Align labor protections for farmworkers with existing standards for other industries. Though not specific to protections for minors employed in agricultural labor, legislators can bring protections for all farmworkers into the 21st century by applying basic labor standards that already exist for all other workers to agricultural workers. Colorado lawmakers recently enacted legislation (2021 CO SB 87) that repealed provisions of state law that exempted farmworkers from wage and hour protections, in addition to granting agricultural workers the right to unionize, certain meal and rest breaks, and whistleblower protections.
Enhancing Enforcement and Penalties
The growing incidence of egregious child labor violations suggests that existing enforcement mechanisms—and the likelihood that enforcement will occur at all—are insufficient to deter employers from violating the law. For profit-driven corporations, the decision is simple math: one analysis of DOL data found that federal penalties for minimum wage and overtime violations are “often relatively small when weighed against the small probability of detection of the violation for many firms.” In other words, an effective enforcement strategy must consider the cost of noncompliance in addition to maintaining a credible ability to enforce.
Increasing Penalties
Research shows that higher penalty amounts are an effective deterrent for labor violations; one study comparing minimum wage violations with state employment laws across all 50 states and the District of Columbia found that “the stronger the state’s employment laws, the lower the incidence of minimum wage violations…states that implemented the strongest penalties—treble damages—experienced statistically significant drops in violation rates.”
Establish strong civil and criminal penalties, including minimum penalties and damages payable to aggrieved workers. State lawmakers can consider proposals that would impose harsher civil and/or criminal penalties or establish minimum penalty amounts to ensure that all violations are met with an appropriate financial penalty. The Children Harmed in Life-Threatening or Dangerous (CHILD) Labor Act (2023 US HR 6079) would increase the existing federal maximum civil penalty amount tenfold and increase the maximum criminal penalty by a factor of 75 to $750,000. Another federal proposal, the Stop Child Labor Act (2023 US S 3051), would establish a new minimum civil penalty of $5,000 and increase the maximum penalty from $11,000 to $132,270. Legislators in Virginia are considering a bill (2024 VA HB 100) that increases the maximum civil penalty for child labor violations resulting in serious injury or death from $10,000 to $25,000 per violation, in addition to establishing a new minimum civil penalty of $500 and raising the maximum civil penalty from $1,000 to $2,500 for all other violations. Under existing California law, violations of child labor laws are subject to civil penalties (Cal. Lab. Code § 1288), ranging from a minimum of $500 to a maximum of $10,000 per violation, in addition to criminal penalties (Cal. Lab. Code § 1303), which carry a minimum fine of $1,000, up to a maximum fine of $10,000 for willful violations. Importantly, an effective penalty regime should also ensure that children subject to child labor violations receive monetary compensation in the form of damages or a portion of assessed penalties.
Enhance penalties for egregious violations. Under federal law, child labor violations that cause serious injury or death or willful or repeated violations that cause serious injury or death are punishable by a higher maximum civil penalty; state lawmakers can consider a similar approach that heightens penalty amounts for the worst offenses. For example, the CHILD Labor Act (2023 US HR 6079) would double maximum penalty amounts for repeated or willful violations, violations involving employment in a hazardous occupation or place of work, violations occurring within 10 years of the final disposition of another violation, and for employers that have employed more than 10 children in a violation. Michigan lawmakers are considering legislation (2023 MI HB 4932) that would create a new felony offense for violations that result in death or great bodily harm, punishable by up to five years of imprisonment for a first offense, up to 10 years for a second offense, and up to 20 years for a third or subsequent offense. In California, severe violations, such as underaged employment in hazardous occupations, employment in excess of daily hour limits, or other violations that present an imminent danger to the youth, are subject to harsher civil penalties as Class A violations (Cal. Lab. Code § 1288(a)). Class A violations involving minors 12 years of age or younger are further subject to a minimum civil penalty of $25,000 and a maximum of $50,000 per violation (Cal. Lab. Code § 1311.5).
Enhancing Enforcement
State lawmakers can also ensure that more employers are compelled to comply with child labor laws by the plausible belief that officials have the capacity to enforce the law. In order to be effective, an enforcement regime must give aggrieved workers the confidence that they will be protected and made whole throughout the process of an investigation.
Establish anti-retaliation protections for workers. Lawmakers can consider applying anti-retaliation protections to child labor laws, which may include establishing a rebuttable presumption that retaliation has occurred under certain circumstances, clearly defining types of protected activity or prohibited adverse actions, providing for increased damages when retaliation occurs, and ensuring that workers can receive injunctive relief before the conclusion of any investigation. For example, the federal CHILD Labor Act (2023 US HR 6079) would create a new anti-retaliation provision within the FLSA for any complaint or proceeding relating to child labor, punishable by a civil penalty of up to $75,000 per violation, in addition to legal or equitable relief. Under California’s Child Labor Protection Act (2014 CA AB 2288), youth workers who have suffered retaliation by their employer for filing a claim or civil action alleging a violation of child labor laws are entitled to treble damages.
Extend statute of limitations for enforcement. Child labor violations involve children who may not come to understand their rights under the law for years to come; an extended timeline for enforcement may allow more investigations to come to light. The federal CHILD Labor Act (2023 US HR 6079) would extend the statute of limitations for child labor enforcement actions from 2 years to 10 years after the cause of action accrued. In California, lawmakers enacted a bill (2014 CA AB 2288) that “tolled” the statute of limitations on child labor violations, effectively suspending the clock on the statute of limitations to begin counting only once a worker reaches the age of majority.
Expand administrative enforcement powers and deterrence strategies. State lawmakers can also give agency officials a wider range of enforcement tools throughout an investigation. States could consider establishing a state-level version of the “hot goods” provisions of federal labor law, which authorize the DOL to seek a court order to stop the shipment of goods produced in violation of the FLSA. The federal CHILD Labor Act (2023 US HR 6079) would authorize the Secretary of Labor to issue a stop work order that applies to one or more worksites of an employer in violation of child labor laws and requires that employers continue to compensate employees affected by the order. In Texas, lawmakers enacted a bill (2023 TX HB 2459) that authorized the state attorney general to seek injunctive relief against employers for repeated violations of child labor laws. Michigan lawmakers are considering legislation (2023 MI HB 4932) that would authorize the Director of the Department of Labor and Opportunity to bring an action to “obtain an injunction against a person who is engaging in, or about to engage in, a method, act, or practice” in violation of child labor laws. State lawmakers may also consider providing resources to labor agency officials that specifically provide the capacity to widely publicize child labor violations, including publicly naming offenders and sharing the results of investigations, such as the penalties assessed and other amounts recovered.
Add labor enforcement capacity, particularly to support migrant children. State lawmakers can also consider approaches that add language and cultural capacity for working with children who are most affected by child labor violations, especially unaccompanied minors, in addition to training that ensures appropriate engagement in ways that do not re-traumatize children. Under California’sDymally-Alatorre Bilingual Services Act, every state agency serving a “substantial number of non-English-speaking people” is required to employ a “sufficient number of qualified bilingual persons in public contact positions to ensure the provision of information and services to the public, in the language of the non-English-speaking person” and further requires the translation of any materials explaining public services. Michigan lawmakers recently passed legislation (2023 MI SB 382/HB 4720) that creates new requirements for state agencies to “provide meaningful language access to public services for individuals with limited English proficiency,” which includes oral language services and translation of documents.
Authorizing Enforcement on Behalf of the State
To add to state enforcement capacity, state legislators can also consider options that empower other entities to carry out enforcement actions on behalf of state officials. As recent reporting on the child labor crisis shows, migrant children and their families, concerned by the looming threat of deportation, are fearful of government officials. However, they may be eligible for programs like the Deferred Action for Labor Enforcement (DALE) program, which provides temporary protection against deportation and work authorization to noncitizen workers who have witnessed or been victims of labor violations.
Establish grant funding for community-based enforcement. Lawmakers in California enacted a bill (2021 CA AB 138) that authorized a pilot program for community-based enforcement of labor violations against garment workers. Under the pilot, organizations are eligible to receive funds to provide educational programming, direct assistance to workers in filing a wage claim, and legal assistance to garment workers. Community enforcement programs (also known as co-enforcement and strategic enforcement partnerships) allow nongovernmental organizations, often worker organizations, legal nonprofits, or community-based organizations (CBOs), to closely collaborate with governmental enforcement agencies to improve enforcement outcomes. For the purposes of labor enforcement, this approach harnesses the trust that CBOs can build with workers—especially immigrant workers who may be wary of government officials—while also leveraging existing nongovernmental capacity and funding for other efforts that support effective enforcement, such as worker education and outreach.
Authorize aggrieved employees to act as private attorneys general. Under California’sPrivate Attorneys General Act (PAGA), individual workers are authorized to file a claim on behalf of the state to recover civil penalties for labor violations. Aggrieved workers can bring enforcement actions on their own behalf and on behalf of other similarly situated employees, and civil penalties recovered under such actions are distributed between the workers and the agencies to support continued enforcement. In 2019, over $88 million in penalties were remitted back to the state labor agency through PAGA actions, allowing the agency to increase staffing and language efforts.
Establish grant funding for enforcement by local prosecutors. In the state’s 2023-24 budget (2023 CA SB 101), lawmakers approved an $18 million appropriation for the Workers’ Rights Enforcement Grant Program, which provides funding to local prosecutors for the investigation and enforcement of state labor laws.
Establishing Legal Remedies for Aggrieved Children
As an additional layer of deterrence against the most grievous violations of child labor protections, lawmakers can also ensure that aggrieved children have pathways to seek adequate legal remedies against their employers.
Create an exception to exclusive remedies available to workers who are injured or killed and increase benefits for illegally employed workers. Generally, workers and their families are limited to compensation through workers’ compensation as the sole remedy in cases where injury, illness, or death has occurred on the job. In exchange for benefits received through workers’ compensation insurance, workers lose the right to file lawsuits against their employers, who may only face an increased premium payment. Some states have created an exception to workers’ compensation as the exclusive remedy in cases where a child has been injured and employed in violation of child labor laws. Colorado lawmakers recently enacted legislation (2023 CO HB 1196) to clarify that in cases involving injury “during a week when the employer intentionally required the minor to work hours” prohibited by law, or when engaging in work prohibited by law, aggrieved children are entitled to pursue legal action against employers in addition to remedies through workers’ compensation. Under New Jersey law (N.J. Rev. Stat. § 34:15-10), minors who are injured while employed in violation of child labor laws are eligible for twice the amount of benefits available through workers’ compensation, with employers—not insurance carriers—being responsible for the extra compensation or death benefit.
Establish a private right of action. At the federal level, the Stop Child Labor Act (2023 US S 3051) would establish a private right of action for minors who have been aggrieved by child labor violations and hold employers liable for compensatory and punitive damages of up to $250,000.
Extending Liability to All Entities That Profit from Child Labor
The increasingly complex nature of businesses that utilize temporary workers, staffing agencies, contract workers, independent contractors, and other work structure strategies “challenge the nearly century-old workplace policies built around direct, bilateral employment relationships.” Federal employment law generally holds that more than one entity may be held responsible as joint employers for the purposes of labor violations. In announcing its Interagency Child Labor Task Force, the DOL recently signaled that its enhanced enforcement efforts would apply scrutiny to violations committed by entities within an employer’s supply chain, including contractors or staffing agencies. At the state level, legislators can extend liability to include the most powerful and well-resourced entities that have escaped accountability.
Establish lead corporation liability for violations committed within supply chains. At the federal level, the CHILD Labor Act (2023 US HR 6079) creates a new standard for “secondary oppressive child labor,” which creates new responsibilities for employers to take steps to ensure that contractors and subcontractors are compliant with child labor laws. Though not specific to child labor violations, lawmakers in Minnesota recently enacted an omnibus labor bill (2023 MN SF 3035) to hold construction contractors liable for wage and hour violations committed by a subcontractor. In California, such laws exist to extend liability for labor violations committed by labor contractors (2014 CA AB 1897); contractors in the long-term care, janitorial, and gardening industries (2015 CA SB 588); contractors on private construction projects (2017 CA AB 1701); major retailers for shipping logistics contractors (2018 CA SB 1402); and fashion brands for claims made by garment workers employed by manufacturers or contractors (2021 CA SB 62).
Establish joint liability for franchisors and franchisees. Licensing agreements that allow independent owners, or franchisees, to operate businesses under the brand of a franchisor are typically comprehensive and precisely drafted to ensure brand consistency. However, franchise agreements are vague when it comes to compliance with labor laws to avoid liability, even though name-brand franchisors have the power and resources to protect against child labor violations. California lawmakers recently enacted a bill (2023 CA AB 1228) that, as introduced, would have made fast food franchisors jointly liable for labor violations committed in a franchisee’s establishment, though the provisions were stricken from the bill prior to passage. As proposed, the bill would have also voided any agreement between franchisors and franchisees to indemnify the franchisor from liability, allowed franchisees to sue franchisors if the terms of a franchise agreement prevent compliance with labor laws, and established a notice and cure process for franchisors regarding violations at franchisee establishments.
Establishing Public Procurement Requirements
State lawmakers can also amend public procurement processes to require strict compliance with child labor protections by government contractors and their supply chains.
Establish strict disclosure and compliance requirements for public contracts. By setting a state standard for compliance with child labor laws, lawmakers can ensure that no taxpayer funds are spent on contractors that rely on illegal child labor. At the federal level, the Preventing Child Labor Exploitation Act (2023 US S 3139) would require federal contractors to annually disclose child labor and worker safety infractions within the preceding 3-year period, in addition to establishing a new criminal penalty for employers knowingly failing to make such disclosures. The bill additionally authorizes the Secretary of Labor to determine corrective measures that contractors which have committed a violation must complete in order to remain eligible for contracts and to publish a list of entities that are determined to be ineligible for federal contracts due to their history of serious, repeated, or pervasive labor violations or their failure to address corrective measures.
Supporting Education, Outreach, and Coordination of Services
Adequate enforcement of any labor law requires that workers are supported with knowledge that empowers them to exercise their rights. In the case of children, who are new to the workforce and may be unaware of their rights under child labor laws, education and outreach efforts can yield long-term benefits in a workforce well-versed in their rights. States can also fill a critical role by identifying service gaps that exist for children vulnerable to labor exploitation, especially migrant children and children in families with language or literacy barriers.
Develop education and outreach programming for children and families. States can leverage school systems as an access point to ensure that children and their families are aware of their rights under the law. California lawmakers recently enacted a bill (2023 CA AB 800) designating one week as Workplace Readiness Week, during which high schools provide information to students on their rights as workers. The bill also requires that minor work permits include information on workers’ rights in “plain, natural terminology easily understood by the pupil.”
Support coordination among labor officials, social services, and immigrant legal services. Recent reporting shows that in many instances, children subject to child labor violations are often in an extremely precarious and even captive position, in danger of deportation or retaliation against family members in small company towns or eviction when their employer is also their landlord. To minimize barriers to federal programs that offer legal relief from deportation and material assistance with basic needs, lawmakers can lead the coordination of resources across state agencies and with community-based organizations to develop supports that are sensitive to the distrust that families may have for government officials and to the traumatic experiences of young workers.
Conclusion
Industry-driven attacks on child labor standards rely on a false narrative that children universally have the opportunity to “choose” a job where they can learn important lessons for adulthood and “sock away” savings in a Roth IRA. And yet, that narrative couldn’t be further from reality for the children who would be most affected by the deregulation of child labor. As recent reporting and data show, the children most subject to child labor violations have no good choices; they have only the choice to survive.
Trapped in the jaws of our nation’s profit-driven economy and brutally inhumane immigration system, both designed by a relentless corporate lobbying machine that has captured statehouses and courts, migrant children are pushed into the shadows where they are exploited without recourse. In some of the most shocking investigations, employers receive a slap on the wrist, if any at all, and continue operating with their reputations and profit margins intact. Even in cases of injury and death, these children’s families are not afforded the dignity of any measure of accountability or care.
In defending against the corporate conspiracy to deregulate child labor, state legislators should be clear that the campaign is just one piece of a massive and generational project to remake the economy into one that gives corporations license to extract exorbitant profits from increasingly unregulated and dangerous child labor. Other critical pieces of the destructive plan seek to eviscerate the social safety net to ensure that workers have no choice when faced with unsafe and abusive working conditions; to dismantle critical institutions like public schools by robbing taxpayer coffers to pay for colossal corporate tax subsidies; and by demonizing and punishing immigrants, to create a class of workers who suffer violations in silence for fear of deportation and family separation.
A special thank you to Jenn Round, the Director of Beyond the Bill at the Workplace Justice Lab@Rutgers University, for her insightful comments and valuable improvements to this publication.
A State Legislator's Guide to Direct Pay: Building Jobs & Sustainable Public Energy
A State Legislator's Guide to Direct Pay: Building Jobs & Sustainable Public Energy
Executive Summary
The Inflation Reduction Act (IRA) includes Direct Pay tax credits that have the potential to bring nearly unlimited funding for clean energy projects into the communities that need them most. Direct Pay tax credits will radically expand publicly owned energy, support communities transitioning away from polluting energy sources, generate affordable—and potentially free—electricity, and create good jobs for local communities.This guide is designed to help state lawmakers seize this historic opportunity for their communities through:
Community education and outreach: State legislators are trusted messengers who can spread the word about this opportunity to local governments, community organizations, and other eligible entities within their state.
Implementation: State legislators can ensure that the state government enthusiastically implements the IRA and secures Direct Pay funding for their state by implementing eligible projects across all levels of state government.
Funding and policy making: State legislators can help other eligible entities like local governments and nonprofits implement Direct Pay projects by providing matching funds, creating revolving funds or low/no-interest loans, creating technical assistance programs, and building in policy incentives to increase equity and protect workers within Direct Pay programs in the state.
Direct Pay tax credits are available to tax-exempt entities like state governments, local governments, schools, hospitals, public utilities, houses of worship, and nonprofit organizations for the first time ever. Direct Pay tax credits can fund a wide range of renewable energy projects like solar arrays, wind turbines, electric vehicle (EV) charging infrastructure, and storage resources like batteries. Every project that meets the Direct Pay requirements will receive the tax credit, so communities can implement project after project without competing for limited and dwindling funds. However, it will take robust leadership from state-level elected champions to fully realize this opportunity.State governments can receive Direct Pay tax credits, which can provide significant funding for state-owned green energy projects and can be used on an uncapped number of qualifying projects. In addition, state governments have a critical role to play in ensuring that state residents understand this opportunity and have the knowledge, financing, and technical support needed to seize this opportunity through policies like grants, revolving funds, and technical assistance. This guide is intended for state governments to use and to better understand how to use Direct Pay to help expand resilient, sustainable energy, lower energy costs, take action on the climate crisis, and create good-paying local jobs.
For the first time ever, thanks to the IRA, the federal government will give tax-free direct cash funding to tax-exempt entities like state governments, local governments, schools, hospitals, public utilities, houses of worship, and nonprofit organizations to build renewable energy projects like solar arrays, wind turbines, EV charging infrastructure, and storage resources like batteries. This provision—called Direct Pay, or sometimes Elective Pay—gives tax-free cash payments from the IRS. These Direct Pay tax credits create an opportunity to radically expand publicly owned energy, support communities transitioning away from polluting energy sources, generate affordable—and potentially free—electricity, and create good jobs for local communities.
Understanding the Funding Available Through Direct Pay
The funding available through Direct Pay can be unlimited! Direct Pay funds come in the form of refundable tax credits. Since eligible entities like state governments are tax-exempt, the tax credits are cash payments from the federal government and are paid directly to the eligible entity once the project begins generating energy. The credits last until 2032, and once the IRS determines that the project qualifies, the eligible entity will receive direct tax-free fundscovering 30% to 70% of the project costs or an amount for each kilowatt generated.Every project that completes a pre-filing process and meets the IRS’ requirements will get Direct Pay funds. Projects that meet worker protection standards, buy American-made materials, and support communities with the greatest need will also qualify for more funding. The state governments, cities, counties, nonprofit organizations, and other eligible entities can all access this funding simultaneously and do not need to compete with each other for it. Eligible entities are not limited in the number of eligible projects they can undertake. For example, state governments could put solar panels on state-owned buildings, invest in EV charging infrastructure for state fleets, and create a program to build state-owned solar panels and wind turbines in communities across the state. Each of these projects would be eligible for Direct Pay funding once completed, and there is no limit to the number of eligible projects that the state could complete.
Expanding Racial and Economic Justice Through Direct Pay
Creating Good Green Jobs
Eligible entities can maximize economic justice for working people by meeting the IRA’s requirements to pay workers a prevailing wage and use registered apprentices on projects so workers get the training they need to build careers. State and local governments can also ensure their projects create safe, high-quality jobs and that projects stay on time and budget by using union labor. State governments can also maximize their impact on economic justice by attaching additional worker protection requirements for Direct Pay-eligible projects that receive state grants or state technical assistance. See the Congressional Progressive Caucus Center’s (CPCC) FAQs on How to Protect Direct Pay Project Workers and Guide to IRA Worker Protection Requirements for more information.
Lowering Energy Burdens
In addition to creating good green jobs, states can use Direct Pay to increase economic and racial justice by lowering the burden of high energy costs on low-income households. Twenty-five percent of all U.S. households struggle with a high energy burden (i.e., spend more than 6% of their income on energy bills), and 67% of low-income households face a high energy burden. Black households have a 43% higher rate of energy burden compared to non-Hispanic white households. Native American households face a 45% higher burden, and Hispanic households face a 20% higher burden than non-Hispanic white households. Renters and older people also face disproportionate burdens. Publicly owned clean energy infrastructure can play a critical role in lowering energy costs for households struggling to afford to heat and cool their homes because publicly owned energy can serve the public interest rather than shareholder profits, keeping costs down.
Addressing Environmental Racism
Governments can maximize racial justice by taking on projects that serve the communities that have been hardest hit by racist policies, fossil fuel extraction, and pollution. Black, Indigenous, and other people of color are more likely to live in communities with high pollution burden, that are near dirty power plants, or that are facing catastrophic harm in the climate crisis. For example, the American Lung Association found that people of color are 3.7 times more likely than white people to live in a county with high levels of air pollution. People of color are also disproportionately likely to live in areas affected by heat or flooding and work in occupations where they are exposed to toxic conditions. A rapid and just green energy transition is critical to achieving racial justice.The unprecedented funding offered by Direct Pay is a critical opportunity to begin investing in the communities that have borne the greatest burden under the current extractive energy economy. For example, a state government might build publicly owned resilient power in communities prone to blackouts and outages. Similarly, a state government could build publicly owned utility-scale renewable energy projects to transition away from coal-fired power plants, install community solar for public housing units, or install public EV charging stations in frontline communities.
Redressing Redlining and Bluelining
Environmental racism subjects communities of color to higher rates of toxic exposure and climate risk. Decades of disinvestment and racist policies like redlining also mean that these same communities are more likely to need help securing the up-front funding to pay for green energy projects. The impact of disinvestment and redlining is magnified in many communities by bluelining and systematic financial discrimination against communities because of perceived environmental risk. This financial discrimination could prevent communities of color and low-income communities from securing the financial resources to build clean energy infrastructure and benefit from the green energy economy. State governments can play an important role in ensuring an equitable implementation of Direct Pay by creating grant programs or revolving funds that provide no-cost or low-cost funding for green energy projects, especially by reserving funding for projects serving communities of color and other environmental justice communities.
Centering Community Voices
Direct Pay is a perfect opportunity to engage directly with frontline communities so that state-run and state-funded projects reflect the needs and demands of communities themselves. Governments can also prioritize workers of color when hiring for Direct Pay project jobs. Tools like pre-hire collective bargaining agreements can include hiring targets for workers of color, women, workers with disabilities, or veterans. These agreements bring jobs to target communities and shrink racial and gender pay disparities.
The Role for State Elected Champions
State-level elected champions can help their communities seize this historic opportunity in three key ways:
Community education and outreach: State legislators are important and trusted messengers who can spread the word about this opportunity to local governments, community organizations, and other eligible entities within their state.
Implementation: State legislators can ensure that the state government enthusiastically implements the IRA and pursues Direct Pay projects across the state government and state agencies.
Funding and policy making: State legislators can use their policy-making function to help other eligible entities implement Direct Pay projects by providing matching funds, creating revolving funds or low/no-interest loans, creating technical assistance programs, and building in incentives to increase equity and protect workers within Direct Pay programs in the state.
Community Education and Outreach
Many eligible entities are unaware of the Direct Pay provision in the IRA and its potential to create good green union jobs, lower energy costs, clean up our air and water, and more. State legislators are trusted messengers who can help spread the word about this opportunity to city and county governments and other eligible entities among their constituencies, including school districts, public universities, nonprofit hospitals, houses of worship, and nonprofit community organizations. Opportunities to spread the word about Direct Pay include:
Host a town hall or public meeting on Direct Pay opportunities in your community.
Host a meeting with city and county officials, school board members, key community groups, and leaders of key anchor institutions in your district, such as large public universities, nonprofit hospitals, and school districts, to encourage them to take action with Direct Pay.
Host a meeting with utilities serving your district to encourage them to actively support Direct Pay projects by making interconnection agreements simple and equitable.
Host a meeting with local community foundations and other local philanthropists to encourage them to offer grants and funding to support the construction of Direct Pay projects by small eligible entities.
Share information about Direct Pay on social media.
Sample Direct Pay Communications Materials
The CPCC has created a partner toolkit on Direct Pay that includes sample messaging, sample social media posts, shareable graphics, and a shareable video explaining Direct Pay.
CPCC has created a sample presentation on Direct Pay that you are free to use without attribution or adapt for your purposes however you see fit.
State Implementation
State governments and state agencies are eligible entities under the Direct Pay provisions. The scale of projects possible at the state level helps ensure that the promise of the IRA is made real. Example state-level sustainable Direct Pay projects:
A state implements a 100% clean energy plan or other climate action plan and uses Direct Pay to supplement the cost of implementing widespread clean energy projects across the state. According to the Initiative for Energy Justice’s Environmental Justice Scorecard, New York’s Climate Leadership and Community Protection Act (SB 6599) and Washington’s Clean Energy Transformation Act (SB 5116) reflected more environmental justice principles in the creation, implementation, and design of their programs than most existing state 100% clean energy plans. Many of the plans envisioned in these laws would now qualify (at least in part) for Direct Pay tax credits.
A state uses Direct Pay to supplement the cost of electrifying the state fleet through building out solar-powered EV charging infrastructure for state-owned and -operated vehicles. Oregon, Hawaii, Minnesota, and Washington have announced plans to electrify state fleets. Today, building EV charging infrastructure as part of those plans would be eligible for Direct Pay tax credits, and many other parts of the IRA include funding for clean vehicles that could further supplement these plans.
A school district in Batesville, Arkansas, installed solar panels and made its buildings more energy efficient, saving nearly $300,000 per year. The district then used the money saved to raise teacher pay. Today, adding solar panels to school buildings or other state-, city-, or county-owned buildings would also qualify for a Direct Pay tax credit, reducing the cost of the initial investment and creating even more savings that can be applied to teacher pay or other critical community priorities.
A state puts solar panels on state-owned buildings from the state house to state agencies, creating good green jobs and lowering energy costs for the state. States can add solar, wind, or other clean energy infrastructure to state-owned buildings directly and claim Direct Pay tax credits or create grant programs to add clean energy infrastructure to other publicly owned buildings.
A state housing agency updates public housing and affordable housing units, including adding rooftop solar to lower energy costs. For example, investments in public housing such as the Massachusetts’ Affordable Homes Act could be expanded using Direct Pay.
A state supports state-funded schools to transition to electric buses by matching federal funds to transition local bus fleets and building solar-powered charging stations on school property. For example, Delaware and Maryland are among the states that are moving toward school bus electrification. The school system saves money and reduces dangerous diesel emissions that put our kids at risk. The school system would be able to claim a reimbursement for up to 70% of total project costs with Direct Pay credits for building EV charging stations and solar panels to help offset the costs of transitioning the school bus fleet and could match that with other federal funding for the purchase of electric vehicles.
Eligible entities will face a number of challenges in seizing the Direct Pay opportunity, including navigating an unfamiliar process with the IRS, planning and implementing sometimes complex energy projects, and finding the up-front capital to cover the cost of construction and bridge the difference between project costs and the portion eligible for Direct Pay funds. State legislators have a central role in ensuring that their communities can fully embrace this opportunity to take urgent action on the climate crisis, lower energy costs, clean up our air and water, and create good-paying green jobs. Beyond ensuring that state governments implement Direct Pay-eligible programs, state legislators have the opportunity to help other eligible entities make the benefits of the IRA real in their communities by using state funding and state policymaking tools to help other entities access Direct Pay tax credits. Policies like those that call for 100% sustainable energy by 2030 create the demand and market assurance necessary to fully maximize the benefits of the IRA, but only if they are created and implemented with a central focus on improving life for communities on the frontlines of the extractive energy economy and the climate crisis. This must include community participation in the lawmaking and implementation process and significant, measurable, and enforceable programs designed to restore the communities that have been most harmed. Providing matching funding will be especially critical for communities with the least access to resources, including frontline and fenceline communities, communities of color, communities transitioning away from extractive economies, rural communities, and low-income communities. Below, we outline some possible examples of Direct Pay financing. We plan to update this when we have more information from the federal government.
Funding for Direct Pay Projects
While Direct Pay tax credits can provide substantial funding for renewable energy, these projects will need additional funds to cover the full project completion costs. Eligible entities will have to cover the cost of project construction before they receive the tax credit. Depending on the exact Direct Pay tax credit, the payment will either be disbursed as a one-time credit covering between 6% and 70% of total project costs when the project is completed or as a payment based on electricity production over ten years. To learn more about the structure of the specific tax credits, see the CPCC’s in-depth explanation of how the investment tax credit (ITC), the production tax credit (PTC), and other bonus credits work here. The Center for Public Enterprise has produced a financial model that makes it possible to compare the ITC and the PTC for a planned project. Many under-resourced communities must raise funds to complete a project before Direct Pay funding is available, which poses a significant obstacle. Access to reliable public funding to match federal funds is necessary for many communities to access the benefits of Direct Pay, or they may be vulnerable to predatory lending. State governments can dramatically increase the reach of the Direct Pay tax credits by providing direct funding through grants and by helping local governments and other eligible entities find safe, reliable, and low-cost financing options that do not undermine the public nature of the ownership of these new sustainable energy generation assets. State funding for Direct Pay-eligible projects increases equity and justice in implementation by adding additional incentives or requirements to target funds toward projects that create good local union jobs and projects that serve frontline communities. The federal government set the floor with the IRA. Now, state legislators can break through the ceiling in achieving maximized benefits for vulnerable communities, the environment, and workers. For example, it is critical to prioritize projects that include community input and reflect community demands rather than simply defining projects by geography, which may unintentionally result in funding projects that disempower or further harm frontline communities. For more information on how to define environmental justice communities in order to prioritize funding for the communities that have been harmed the most, see the Climate and Clean Energy Equity Fund’s report on defining environmental justice communities in policy. Truly just and equitable implementation of Direct Pay will only be possible if policymakers ensure that frontline communities have access to nonpredatory funding. State policymakers can play a critical role in expanding access to Direct Pay in a number of ways, including:
Direct State Funding
States can appropriate funding for grants to local governments or other eligible entities to cover the up-front costs of projects. States can maximize equity and justice in implementation by requiring projects that receive state funds to meet higher labor and community benefit standards. Additionally, they can prioritize grants for the communities that need them most, such as frontline communities and communities of color. For example, several states have implemented grant programs to fund clean energy projects. Washington State’s Department of Commerce provides grants for school sustainability, and Minnesota has proposed a grant program to support the installation of solar panels on public buildings. Minnesota also established a state competitiveness grant fund to award grants to local and tribal governments, utilities, nonprofits, and other eligible entities when they required matching funds to access IRA funds. This type of state grant program is critical because it allows local governments or community nonprofits to finance their projects, and Direct Pay ensures that state funds go further.
State Revolving Funds
To maximize state funds, states could provide funding in the form of a no- or low-cost loan from a revolving fund. While there is not a federally created revolving fund for clean energy, states can establish their own revolving funds to finance clean energy projects. Direct Pay makes those revolving funds considerably less risky, as eligible entities will have a head start on repayment with their Direct Pay reimbursement funds. A no- or low-cost revolving loan fund could work as follows:
A state establishes a no- or low-cost revolving loan fund for local governments, tribal governments, and nonprofit entities within the state. States can add additional worker protections, community participation, and targeting for projects serving the hardest hit communities to the loan fund.
Eligible entities apply to the state for a loan and use the loan funds to complete their project.
The eligible entity pre-files with the IRS once their project is near completion and then applies for Direct Pay tax credits once their project is completed.
The eligible entity receives their Direct Pay funds from the IRS and can apply that toward repaying their loan to the state.
The state reinvests in the next eligible project.
Many states already have an energy loan fund that supports the generation of clean energy projects or energy retrofits within the state. These loan funds could be expanded or modified to create more opportunities to fund Direct Pay-eligible projects and accelerate the clean energy economy. For example, Texas’ LoanSTAR Revolving Loan Fund currently supports energy efficiency retrofits but could be easily expanded to include Direct Pay-eligible EV charging stations and energy generation projects like rooftop solar or wind turbines.
State and Municipal Bonds for Matching Funds
States, cities, and other government entities can authorize the use of bonds to cover the costs of Direct Pay-eligible projects. States can use bonds to fund state-owned Direct Pay projects or authorize bonds to collectively fund smaller projects at the local level. More information on using bonds for renewable energy is available in the Department of Energy bond resource guide for state and local officials.In 2024, California voters will vote on a ballot measure to authorize $15.5 billion in bonds to finance projects for climate resilience, extreme heat mitigation, and clean energy programs, including a $500 million appropriation to the State Energy Resources Conservation and Development Commission for grants to assist in obtaining or receiving a state match to regional hubs for IRA funds. In addition to securing federal grant funds, many of the projects financed by this bond, if it passes, may be eligible for Direct Pay.
State Green Banks
Some states have Green Banks, which are financial institutions designed to lower energy costs and encourage the construction of sustainable energy infrastructure by blending public and private capital and financing a broad range of sustainable energy projects. While “Green Bank” is often used as an umbrella term for many types of public-private partnerships that finance sustainable energy projects, the IRA contains specific requirements for Green Banks to be able to receive funding. Many states already have established some form of Green Bank, but some are still creating theirs or are still working to meet the new Green Bank requirements in the IRA.
Using Other Federal Funding Sources
In some cases, eligible entities will be able to further supplement Direct Pay funding by using other sources of funding in the IRA (for example, using grant funding for rural electric co-ops) or using funding from other federal programs such as funding in the Infrastructure Investment and Jobs Act or remaining American Rescue Plan funding.
Going Beyond the Worker Protection Requirements in the IRA
State funding and state technical assistance programs offer an opportunity to support community uptake of Direct Pay, go beyond the IRA labor requirements, and impose additional protections as a condition of receiving state funds. For example, a state revolving fund to support renewable energy programs could require that programs that receive the state matching funds use union labor. Similarly, state funding could be contingent on the use of pre-hire agreements like local hire programs, Project Labor Agreements (PLAs), Community Workforce Agreements (CWAs), and Community Benefits Agreements (CBAs). It is critical that any state incentives or requirements include strong community input and strong enforcement mechanisms. For more information, please see the CPCC’s Guide to IRA Worker Protection Requirements and FAQs on How to Protect Direct Pay Project Workers. States have a critical role to play in supporting workforce development efforts to build the diverse skilled workforce needed to fully embrace a green energy economy. In addition to the jobs created by the IRA and the growth in green energy infrastructure, more than 1.7 million workers are expected to retire over the next decade. Black, Latino, Native, and Asian individuals, and women are dramatically underrepresented in these growing fields, and state agencies must help build inclusive and equitable workforce development programs. The National Skills Coalition has published a report with recommendations for states in building a just workforce development plan.
Technical Assistance and Coordination
States can maximize the number of eligible entities that can access Direct Pay by coordinating technical assistance programs. Creating programs that will qualify for the Direct Pay provisions often requires specialized planning, including conducting an energy audit, creating an interconnection agreement with a utility, and more. Many smaller nonprofit organizations, local governments, and communities that have been systematically excluded, like low-income communities and communities of color, will need help.
Technical Assistance
State governments can reduce barriers by funding technical assistance that could include:
Public information campaigns about the opportunity
Free energy audits
Hands-on support in planning projects
Support in creating interconnection agreements
Help finding reputable high-road union contractors
Support in completing pre-filing paperwork and IRS documentation. By definition, eligible entities do not usually file complex taxes with the IRS and may lack information and experience in navigating the process.
Some states have established technical assistance programs to support their state’s access to IRA funds. For example, Washington established a statewide Building Energy Upgrade Navigator Program to support building owners in accessing electrification and energy efficiency services, with specific priority for low-income households, vulnerable populations, and overburdened communities. Washington also appropriated $2.5 million to support activities related to securing federal funds, including funding to help community-based organizations, local governments, and ports in overburdened communities apply for financial resources. State-funded technical assistance programs can help increase equity with implementation efforts. Communities of color that have experienced high levels of contamination, communities transitioning away from extractive industries, tribal governments, rural communities, and other communities facing systemic exclusion are more likely to struggle to secure the up-front capital necessary to complete a Direct Pay-eligible project. State-funded technical assistance programs targeted to communities that need them most can ensure that all communities have equitable access to the benefits of the Direct Pay tax credits, including cleaner air and water, new green energy jobs, and lower energy costs.
State Direct Pay Coordination Program
Centralizing efforts within a state-run program or with a cross-agency coordinator can help maximize Direct Pay programs that would actively identify possible Direct Pay projects and build them using the state as the eligible entity. A state entity could actively search out Direct Pay-eligible opportunities within communities and build the projects directly (for example, put solar panels on all the schools in a local school district, perform energy retrofits on nonprofit-owned affordable housing units, or build utility-scale solar farms on Brownfield land). If the state retained ownership of the energy-generating facility, the state should claim the credit directly and lift the burden of paperwork from the smaller eligible entity. If the smaller entity plans to retain ownership of the energy-generating facility, the state could still carry out the project and receive funding by creating a side agreement with the eligible entity to transfer the credit to the state in exchange for the state completing the process. Either of these models would streamline the need for many smaller governments and nonprofit organizations to take on the administrative burdens of designing and building eligible programs and navigating the process to receive the tax credit. These types of programs would be embedded within a relevant state agency such as a state department of energy and would need to work closely with local communities to identify projects that reflect community needs, desires, and priorities. This type of approach requires a larger commitment from state champions, but it could significantly increase the speed at which projects could be implemented, reduce administrative burdens on other eligible entities, and allow the state to prioritize projects that serve historically excluded communities.
Further Resources
The Congressional Progressive Caucus Center will provide regular updates and further resources on Direct Pay. You can sign up for CPCC updates,including invitations towebinars, technical assistance to help your community get Direct Pay funds, resources to build support for Direct Pay projects, and more. You can also find additional materials, like FAQs on Direct Pay, on the CPCC’s website. You can also request technical assistance on a Direct Pay project through the CPCC’s website by filling outour technical assistance intake form. The State Innovation Exchange (SiX) exists to advance a bold, people-centered policy vision in every state in this nation by helping vision-aligned state legislators succeed after they are elected. If you are working to strengthen our democracy, fight for working families, advance reproductive freedom, defend civil rights and liberties, or protect the environment, reach out to helpdesk@stateinnovation.org to learn more about SiX’s tailored policy, communications, and strategy support and how to join a network of like-minded state legislators from across the country.For a constantly updated roundup of resources on the Inflation Reduction Act, Direct Pay, and equitable implementation strategies, please visit the Direct Pay master resources list.
This primer is part of a series on anti-racist state budgets. To understand the concept of creating anti-racist state budgets, it is important to understand the difference between racist and anti-racist ideas and policies. The following excerpts are from How To Be An Antiracist (2019) by Ibram X. Kendi:
Racist vs. Anti-racist Ideas
A racist idea is any idea that suggests one racial group is inferior or superior to another racial group in any way. Racist ideas argue that the inferiorities and superiorities of racial groups explain racial inequities in society. . . An antiracist idea is any idea that suggests the racial groups are equals in all their apparent differences – that there is nothing right or wrong with any racial group. Antiracist ideas argue that racist policies are the cause of racial inequities.
Racist vs. Anti-racist Policies
A racist policy is any measure that produces or sustains racial inequity between racial groups. An antiracist policy is any measure that produces or sustains racial equity between racial groups. . . There is no such thing as a nonracist or race-neutral policy. Every policy in every institution in every community in every nation is producing or sustaining either racial inequity or equity between racial groups.
For additional race-equity concepts and definitions, please visit the Racial Equity Tools glossary webpage.
Overview
We all benefit from funding for education, health care, infrastructure, and other vital services regardless of race, gender, or income level. But the wealthy few have used an army of lobbyists and complicit lawmakers to drive down their own tax rates and to rig the rules. This has created regressive state tax systems that too often exacerbate income inequality across both race and income.[i] In “Progressive Wealth Taxation,” UC Berkeley economists Emmanuel Saez and Gabriel Zucman explained that the top marginal federal income tax rate dropped from more than 70% between 1936 and 1980 to only 37% since 2018, and “when combining all taxes at all levels of government, the U.S. tax system now resembles a giant flat tax.”[ii]
Flat taxes, and even worse, tax codes that levy higher taxes on low- and middle-income families, worsen income inequality and widen the racial wealth gap. Tax structures in 45 states exacerbate income inequality—in the 10 most regressive states, families at the bottom 20% of the income distribution pay up to six times as much in taxes as the state’s wealthiest families.[iii] While the investments made possible by taxes are a powerful force in combating racial inequities, the way those taxes are collected, and from whom, remains deeply inequitable. Regressive state tax policies have deep and lasting roots in anti-Blackness,[iv] and in tandem with discriminatory and exploitative policies that embedded racism across all social and economic systems (e.g., in ownership of land and access to housing, education, and credit[v]), state tax policies have not meaningfully addressed the growing racial wealth gap; and in many states, especially in the South,[vi] these policies actually make racial disparities worse. As of 2016, Black and Latinx families had a median net worth of $17,600 and $20,700, respectively, compared to $171,000 for white families.[vii] A recent study concluded that “if you belong to a historically marginalized racial or ethnic group, your racial status is the stronger predictor of your economic position than your education, income, and in this case, employment status and position.”[viii]
Strong communities and thriving families are built upon a foundation of public investments that benefit us all. Investments in good schools, affordable health care, and transportation infrastructure pay off for everyone. Research shows that higher levels of income inequality create a drag on economic and state tax revenue growth.[ix]States with fairer tax codes enjoy faster economic growth, faster income growth, and increased employment levels than states that are reliant on regressive taxes like sales and excise taxes.[x]
Under a lopsided tax code, a state’s poorest families are paying the most in taxes, while also bearing the brunt of disinvestment when tax revenues decline. During the Great Recession, states slashed education and health care budgets in the face of revenue shortfalls, with lasting consequences for low-income Black, brown, and white communities.[xi] Years of public disinvestment have left the same communities less prepared to weather the COVID-19 public health crisis and future economic downturns. For example, many states have used budget surpluses to push for “shortsighted, costly, permanent tax cuts,”[xii] which leaves these communities more vulnerable to future budget cuts,[xiii] especially as states again grapple with the risk of budget shortfalls.[xiv]
It doesn’t need to be this way; together we can rewrite tax codes to benefit us all. We’ve done this before, so we know that progressive revenue can stimulate economic growth, reduce income inequality, and narrow the gaps in income and wealth created through centuries of racism and discrimination.
Policy Considerations
Policymakers have the power to generate needed revenue by revamping their existing state’s tax codes. They can implement innovative approaches that build a more equitable future and center the needs of communities of color and low-income communities. When considering ways to promote racial equity and reduce wealth inequality in state tax systems, state legislators should refer to the following policy options and work with national and local advocates, especially those groups that center race equity, to develop the best policies for their state.
The wealthy use a range of tax avoidance strategies,[xv] including characterizing income from labor as business income, with pass-through business income in the form of long-term capital gains or dividends, all of which are taxed at a lower rate than ordinary personal income. The wealthy can also defer realizing capital gains and their inheritors can avoid taxes on these gains after they die. As explained by USC professor and tax law expert Edward J. McCaffery in his law journal article “The Death of the Income Tax,” the current tax code is really a wage tax, not an income tax, and those in the 1% of net wealth do not rely on their wages but instead use their assets as collateral to borrow tax-free.[xvi] The uber-wealthy are able to avoid income taxes and create generational wealth by relying on wealth instead of income through a process that McCaffery refers to as “buy, borrow, die.”[xvii] Therefore, we start with one of the most impactful progressive revenue reform ideas to address these loopholes: the wealth tax.
WEALTH TAX
Wealth taxes apply to either an individual’s net worth (total assets net of all debts) or some targeted asset class, which could include financial assets such as bank accounts, bonds, stocks, and/or non-financial assets such as real estate, yachts, sports cars, or other luxury goods. A wealth tax on a household above an exemption threshold is a critical tool for capturing revenue from the most affluent members of society who possess substantial wealth but may have comparatively lower incomes.
It is possible for the wealthiest households to have low taxable income because our tax codes have been designed to allow them to escape taxation in different ways. For example, the tax code does not address unrealized capital gains since until these assets are sold, they are not “taxable income” and thus, much of one’s wealth would not appear on their annual tax returns. (See Center on Budget and Policy Priorities’ report on the issue of special tax breaks for the wealthy for more information.)[xviii]
Estimates from UC-Berkeley professors Saez and Zucman indicated that a federal tax of 2% on net wealth above $50 million and 3% on net worth over $1 billion would only impact 0.1% of (or 75,000) American households and raise $2.75 trillion over a 10-year period.[xix]
Examples of Wealth Tax Legislation
California took the lead by introducing a first-of-its-kind state wealth tax (2020 CA AB 2088) that would have applied a 0.4% rate to net worth, excluding real estate, in excess of $30 million per household.
New York legislation (2020 NY SB 8277) would have created a billionaire “mark-to-market” tax[xx] on residents with $1 billion or more in net assets that would treat billionaires’ unrealized capital gains as income. It would have directed revenues from such a tax into a worker bailout fund to assist workers traditionally excluded from employment protection programs by providing them access to unemployment benefits. A similar but simpler version of this bill was later introduced (2021 NY SB 4482/AB 5092) without the worker bailout fund and with some additional changes, and this bill was estimated by advocates to have the potential to raise $23 billion in the first year and $1.3 billion per year thereafter.[xxi]
Washington legislation (2021 WA HB 1406) would have assessed a modest 1% tax on “financial intangible assets, such as publicly traded options, futures contracts, and stocks and bonds” on wealth in excess of $1 billion (i.e., the first $1 billion is exempt from the wealth tax).
Wealth Tax Design
An OECD study of European wealth taxes includes the following policy recommendations:[xxii]Low tax rates, especially if the net wealth tax comes on top of capital income taxes;Progressive tax rates;Limited tax exemptions and reliefs;An exemption for business assets, with clear criteria restricting the availability of the exemption (ensuring that real business activity is taking place and that assets are directly being used in the taxpayer’s professional activity);An exemption for personal and household effects up to a certain value;Determining the tax base based on asset market values, although the tax base could amount to a fixed percentage of that market value (e.g., 80%-85%) to prevent valuation disputes and take into account costs that may be incurred to hold or maintain the assets;Keeping the value of hard-to-value assets or the value of taxpayers’ total net wealth constant for a few years to avoid yearly reassessments;Allowing debts to be deductible only if they have been incurred to acquire taxable assets—or, if the tax exemption threshold is high, consider further limiting debt deductibility;Measures allowing payments in installments for taxpayers facing liquidity constraints;Ensuring transparency in the treatment of assets held in trusts;Continued efforts to enhance tax transparency and exchange information on the assets that residents hold in other jurisdictions;Developing third-party reporting;Establishing rules to prevent international double wealth taxation; andRegularly evaluating the effects of the wealth tax.
ESTATE TAX
Another way states can tax wealth is through an estate tax, which is levied on the estate (money and property) of the most affluent individuals who have passed away. While there is a federal estate tax[xxiii] on estates valued over $12 million (as of 2022), only 12 states and the District of Columbia have their own estate tax.[xxiv] More states have considered implementing this extremely progressive tax because it helps to prevent the growth of “dynastic wealth” by directly targeting the intergenerational transfer of wealth and addressing the racial wealth gap. In 2016, 9 out of 10 households with assets above the federal estate tax threshold of $5.5 million were white.[xxv]
Examples of Estate Tax Legislation
Washington has a 20% estate tax (WA Stat. § 83.100.040), which is one of the highest rates in the nation, and Washington is the only state without an income tax that levies an estate tax.
The Hawaii legislature (2019 SB 1361) also increased its top estate tax rate to 20%, which became effective at the start of 2020. For estates over $10 million, the tax is now $1,385,000 plus 20% of the amount the net taxable estate exceeds $10 million.
Maine (2019 ME LD 420/HP 329) legislators introduced a bill that would have increased their state’s estate tax by lowering the exclusion amount for an inheritance from $5.6 million to $2 million.
INHERITANCE TAX
While an estate tax is a levy on one’s estate, an inheritance tax is levied on those who inherit money or property of a person who has died. Inheritances are a major contributor to growing wealth inequality and disparities between white households and households of color. One reason white families hold more wealth is they are considerably more likely to receive an inheritance, a gift, or additional family support.[xxvi] Specifically, nearly 30% of white families report having received an inheritance or gift, compared to about 10% of Black families, 7% of Hispanic families, and 18% of other families. More robust taxation of inherited wealth not only reduces the transfer of concentrated wealth from one generation to the next, but it also serves as a progressive source of revenue for critical services that we all depend on.
Examples of Inheritance Tax Laws
Only six states impose inheritance taxes. Of these states, Nebraska (NE Stat. 77.2004, 77.2005, and 77.2006) has the highest top rate at 18% as of 2022. The state’s inheritance tax is imposed on all property inherited from the estate of the deceased. The value of such property is based on the fair market value as of the date of death, and the amount of the tax depends upon the recipient's relationship to the deceased. The surviving spouse pays no inheritance tax, children and other close relatives pay a 1% tax beyond an exemption amount, and more distant relatives pay a maximum 13% tax. In all other cases, the rate of tax is 18% on the clear market value of the beneficial interests in excess of $10,000. Unfortunately, recently enacted legislation (2022 NE LB 310) will reduce many of these rates and/or raise the exemption amounts starting in 2023.
The following states also levy a tax on inheritance. See below for details on their tax rates:
When the political realities do not allow for a wealth tax of some kind, an incremental step toward reducing the racial wealth gap is to design state personal income tax systems to better ensure that the wealthiest pay their fair share. As of 2021, nine states do not even have a broad-based state income tax,[xxvii] many of which heavily rely on sales and excise taxes, a practice that the Institute on Taxation and Economic Policy (ITEP) deemed a characteristic of the most regressive state tax systems.[xxviii] States such as California, Minnesota, New Jersey, and Vermont have highly progressive income tax brackets and graduated-rate tax structures that allow them to tax different income at different rates.[xxix] In addition, at least eight states (CA, CT, HI, MD, MN, NJ, NY, and OR) and D.C. have enacted long-lasting millionaires’ taxes since 2000.[xxx] A 2022 ballot initiative in Massachusetts would raise the income tax rate for incomes above $1 million from 5% to 9%.[xxxi]
Examples of Progressive Income Tax Legislation & Ballot Initiatives
The graduated income tax structure ensures the most affluent individuals, who are mostly white,[xxxii] pay a greater percentage of their income in taxes than their lower- and middle-income counterparts.
The New Jersey legislature passed 2020 NJ AB 10/Chapter 94, which increased the gross income tax rate from 8.97% to 10.75% on income between $1,000,000 and $5,000,000 (this was already the rate for income over $5 million), and provided an annual rebate of as much as $500 for families making less than $150,000.
There are nine states, including Illinois, that impose a flat income tax.[xxxiii] In 2020, Illinois voters failed to pass a ballot initiative regarding a graduated income tax amendment,[xxxiv] which would have raised approximately $1.4 billion for the rest of the budget year and $3.4 billion over a full 12 months.[xxxv] The amendment would have repealed the state’s constitutional requirement that the personal income tax be a flat rate and instead allow for a graduated income tax.
Arizona voters approved a 2020 ballot initiative, Proposition 208, to enact a 3.5% income tax, in addition to the existing income tax (4.5% in 2020), on income above $250,000 (single filing) or $500,000 (joint filing).[xxxvi] This initiative was successfully challenged in court by a right-wing advocacy group with ties to the Koch Family and subsequently overturned based on an interpretation of the state constitution. If the new law had survived court challenges, it would have provided additional tax revenue to support teacher and classroom support staff salaries, teacher mentoring and retention programs, and career and technical education programs.
Millionaire Migration/Tax Flight Myth
This myth refers to the idea that taxing the wealthiest individuals will encourage them to leave and migrate to other states with lower taxes. Anti-tax advocates and politicians often use this myth to advocate for more tax cuts and regressive tax systems. However, the people who tend to move most frequently are not the rich, but instead are typically young college graduates and the lowest income residents who earn below-market incomes and want a better quality of life.[xxxvii] While a very small number of wealthy households may leave as a result of tax increases, migration rates for higher-income earners are low and have little effect on the millionaire tax base.[xxxviii] Research has shown that increasing tax rates on affluent households results in a net positive fiscal impact over time.[xxxix]
CAPITAL GAINS TAX
States should also consider strengthening their taxes on capital gains income—the profits an investor realizes when selling an asset that has grown in value, such as shares of stock, mutual funds, or real estate investments. The Brookings Institution has a resource on capital gains reforms that discusses the current state of capital gains taxes on a federal level and different ways policymakers can use such taxes as a progressive source of revenue.[xl]
While some states levy a tax on personal income and capital gains at the same rate, as of 2021, nine states provide the wealthiest households with special tax preferences for their capital gains by taxing long-term capital gains at a lower rate than ordinary income.[xli],[xlii] These special tax breaks and preferences prioritize investors’ capital gains income at the expense of the wages and salaries earned by working families and lower-income households of color.
Examples of Capital Gains Tax Legislation
In Vermont, the legislature passed a bill (2019 VT HB 541) that limits the amount of long-term capital gains a taxpayer can exclude from taxable income to $350,000. Prior to the bill’s passing, Vermont had historically allowed income taxpayers to exclude up to 40% of their capital gains from their taxable income, regardless of the total amount.[xliii]
Similarly, the New Mexico legislature (2019 NM HB 6 - Section 14) enacted a tax and budget plan that scaled back a tax break for the wealthiest New Mexicans by reducing the portion of capital gains that are exempt from taxation from 50% to 40%. While the 10% deduction is a step in the right direction, the 40% exemption still serves as a large and unnecessary tax break to the highest-income earners—the individuals who already pay the smallest share of their income in state and local taxes. Thus, it is more equitable for states to not just scale back, but eliminate preferences for capital gains income.
Not only will repealing tax preferences increase revenue for critical public services, but so will creating new surcharges on capital gains. Connecticut lawmakers (2019 CT HB 7415) considered a proposal to levy a 2% surcharge on the capital gains amassed by the wealthiest taxpayers with incomes over $500,000 (for individual filers) and $1 million (for married joint filers). Minnesota (2019 MN HF 2125) also introduced legislation that would have increased the state’s top marginal capital gains tax rate from 9.85% to 12.85%, the second-highest in the country after California (13.3%).
In Washington, Governor Inslee proposed a capital gains tax on the sale of stocks, bonds, and other assets to increase the share of state taxes paid by Washington’s wealthiest taxpayers.[xliv] Legislation to implement this tax was enacted (2021 WA SB 5096), and the state will apply a 7% tax to capital gains earnings above $250,000 for individuals and $500,000 for joint filers.
Legislation has been introduced to close the carried interest loophole. Legislation in Maryland (2021 MD SB 288/HB 215) would have imposed a 17% state income tax on the share general partners receive of a pass-through entity’s taxable income that is attributable to investment management services provided in the state. Similarly, bills in Oregon address the carried interest loophole: 2021 OR SB 479 and 2021 OR SB 482 would impose an additional 19.6% state tax on investment services partnership income, which is currently taxed at the lower net capital gains tax rate.
Note on the Carried Interest Loophole
Investment funds—such as private equity and hedge funds—are often organized as partnerships. These partnerships typically have two types of partners: general partners and limited partners. General partners manage the fund, while limited partners typically only contribute capital to the partnership. General partners can receive two types of compensation: a management fee tied to a percentage of the fund’s assets and a profit share; or “carried interest,” tied to a percentage of the profits generated by the fund. In a common compensation agreement, general partners receive a management fee equal to 2% of the invested assets plus a 20% share in profits as carried interest.The management fee, less the fund’s expenses, is subject to ordinary federal and state income tax rates (the top federal income tax rate for individuals in 2020 is 37%) and the federal self-employment tax. However, taxation of the carried interest is deferred until profits are realized on the fund’s underlying assets, when at such time, the carried interest is taxed [the same] as investment income received by the limited partners. Thus, if the investment income consists solely of capital gains, the carried interest is taxed only when those gains are realized and at a lower capital gains rate on the federal level (the top capital gains tax rate in 2020 is 20%, plus a 3.8% net investment income tax). (Source: Fiscal and Policy Note for 2021 MD SB 288)[xlv]
EXCESSIVE EXECUTIVE COMPENSATION TAX
In addition to a lack of progressive taxes, another contributing factor to the rise in income inequality is the excessive pay for chief executive officers (CEOs). Rather than raising the wages for their workers, corporations are increasing the wealth of their CEOs who make hundreds—sometimes thousands—of times more than their employees. Research has shown that excessive executive pay is not based on value of a CEO’s work and has a spillover effect that “helps pull up pay for privileged managers in the corporate and even nonprofit spheres.”[xlvi] Policymakers can work to address corporate greed and fight for wealth equity by closing the CEO-worker pay gap through an excessive executive compensation tax.
Examples of Excessive Executive Compensation Legislation
The Portland, Oregon, City Council was the first in the country to enact a measure (2016 Ordinance 188129) that levies a tax on companies whose CEOs earned more than 100 times the median pay of their average workers. Corporate income tax increases by 10% if a company’s CEO has a salary ratio of above 100:1, and by 25% for companies with pay gaps equal to or exceeding 250:1. This tax generates revenue for the city’s general fund, which pays for essential city services.
The Washington legislature (2019 WA HB 1681) introduced a bill that would have imposed a surcharge, in addition to business and occupation taxes and public utility taxes, on corporations with excessive chief executive officer pay. Similar to Portland, Oregon’s law, this legislation would have targeted companies with chief executives who were paid more than 50 times the pay of the average worker of that company. The legislature also introduced a second bill (2019 WA SB 6017) that would have imposed an excise tax on annual compensation in excess of $1 million, with a tax rate between 5% and 10% depending on the compensation amount.
Other lawmakers in California, Connecticut, Illinois, Massachusetts, Minnesota, New York, and Rhode Island have also introduced similar bills. The Institute for Policy Studies has an online guide that includes a list of federal, state, and local legislative proposals related to CEO-worker pay ratios, along with general resources.[xlvii]
RAISING PROGRESSIVE MUNICIPAL REVENUE
While legislatures have the power to reform their state’s tax codes, they also have the ability to increase municipal revenue through progressive strategies. However, there are states that limit municipal powers from implementing progressive taxation structures. For example, some states have statutory and constitutional limits on the amount of property taxes that can be levied at the local level.[xlviii] As property tax revenues often support locally provided public services and amenities, state limitations on such taxes prohibit local governments from fully investing in such services. As a result, municipalities are forced to reckon with deep spending cuts, resulting in severe consequences for and decreasing the quality of life of their residents.
Income inequality is an issue that significantly affects communities on not only a national and state level, but on a local and regional scale as well. In order to effectively address disparities in wealth, state policymakers can consider legislation to promote progressive tax structures within municipalities, including repealing any state preemption of local revenue-raising authority. (See Local Progress’s 2015 report for more information about the major obstacles of raising municipal revenue, along with policy recommendations for cities, regions, and states to make local tax collections more progressive.)[xlix]
Public Opinion Polling
The following sample of public opinion polls over the last few years demonstrates a strong support nationally and in sampled states for increasing taxes on the rich, including through a wealth tax, and for protecting key public programs.
Most Americans say billionaires in the U.S. generally don’t pay the full amount of taxes they owe, including 60% of Independents and 53% of those with incomes higher than 200% of the median
Nearly two-thirds of Americans support requiring households to pay at least 20% of their income over $100 million in taxes, including half of Republicans and 64% of those with income greater than 200% of the median
Voters support a wealth tax on the richest 5% of Americans. 66% of voters support a one-time, 5% wealth tax on the richest 5%. 60% of voters agree that essential workers are doing their fair share, and that wealthy Americans must do the same with a wealth tax.
Voters support a wealth tax on the richest Americans. 64% of voters agree that the very rich should contribute an extra share of their total wealth each year to support public programs. Only 33% of voters believe that the very rich should be allowed to keep wealth that increases inequality.
Voters support increasing taxes on the wealthy, and express even stronger support for wealth taxes as a means to fund infrastructure investments. 56% of voters support the creation of a 2% wealth tax on those with a net worth of over $50 million. When framed as a funding mechanism for infrastructure investments, 74% of voters support a wealth tax, 65% support a surtax on income over $200,000, and 63% support a real corporate profits tax.
75% of voters support raising taxes on the rich. Voters also ranked “making the rich pay their fair share in taxes” as their third-highest priority, after health care affordability and protecting Medicare and Social Security from budget cuts.
68% of voters support raising taxes on multimillionaires by taxing income in excess of $10 million at a 70% rate.
93% of voters support a new tax on luxury homes and apartments that are not a family’s primary residence and worth more than $5 million.
92% of voters support a billionaire’s tax, including 66% in strong support, to apply a 2% tax on wealth in excess of $1 billion.
90% of voters support raising the state income tax rate on income over $5 million per year.
87% of voters believe that billionaires, and 81% believe that those with incomes over $5 million, should pay more in state and local taxes.
Voters overwhelmingly support increased taxes on the wealthy to address the state’s budget shortfall, while strongly rejecting cuts to essential services. To address the state’s budget shortfall:
91% of voters support raising taxes on billionaires.
90% of voters support raising taxes on incomes greater than $5 million.
66% of voters oppose reducing funding for state colleges and universities.
75% of voters oppose reducing funding for local cities and towns.
80% of voters oppose reducing funding for roads, bridges, and transportation.
81% of voters oppose reducing funding for K-12 education.
81% of voters oppose reducing funding for health care for low-income families and seniors.
85% of voters oppose reducing funding for services for the elderly or disabled.
Voters understand that raising taxes on the wealthy is good for all of us. 64% of voters believe that increased wealth taxes will have a good impact on the economy. 62% of voters believe that it will have a good impact on public education, 61% of voters believe that it will have a good impact on public services, and 60% believe that it will have a good impact on access to health care and long-term care.
61% of voters across 11 battleground states are more likely to vote for a candidate who supports a wealth tax. Support was even higher in Maine (69%), Iowa (69%), Arizona (64%), and North Carolina (62%).
62% of voters across 11 battleground states support a 2% wealth tax on individuals with a net worth of over $50 million. Support was even higher in Maine (68%), Colorado (68%), Kansas (65%), Michigan (64%), and Iowa (64%).
79% of voters support raising taxes on the wealthiest Americans.
71% of voters agree that the rich can afford to pay more in taxes, and 66% say that the rich do not currently pay their fair share. 54% of voters consider making the rich pay their fair share to be a very important issue.
80% of voters support raising taxes on households with over $10 million in wealth.
69% of voters agree that the rich take advantage of tax loopholes, leaving the rest of us to pick up the tab, even as they’ve gotten richer.
66% of voters support raising taxes on the rich to protect important government programs like Medicare, Medicaid, and Social Security.
72% of voters support raising taxes on the richest 5% of Americans, including 58% in strong support.
62% of voters believe that the rich do not pay their fair share of taxes. 65% agree that the rich take advantage of many tax loopholes, leaving the rest of us to pick up the tab, even as they’ve gotten richer.
63% of voters support raising taxes on the rich to protect important government programs like Medicare, Medicaid, and Social Security.
70% of voters support raising taxes on households with over $10 million in wealth.
Progressive Wealth Taxation, Emmanuel Saez and Gabriel Zucman, Brookings Papers on Economic Activity, https://www.brookings.edu/wp-content/uploads/2019/09/Saez-Zucman_conference-draft.pdf
[i] Wiehe, M., Davis, A., Davis, C., Gardner, M., Christensen Gee, L., & Grundman, D. (2018). Who Pays? A Distributional Analysis of the Tax Systems in All 50 States. Institute on Taxation and Economic Policy. https://itep.sfo2.digitaloceanspaces.com/whopays-ITEP-2018.pdf
[vii] Dettling, L. J., Hsu, J. W., Jacobs, L., Moore, K. B., Thompson, J. P., & Llanes, E. (2017). Recent Trends in Wealth-Holding by Race and Ethnicity: Evidence from the Survey of Consumer Finances. Board of Governors of the Federal Reserve System. https://doi.org/10.17016/2380-7172.2083
[viii] Addo, F. R., & Darity, W. A. (2021). Disparate Recoveries: Wealth, Race, and the Working Class after the Great Recession. The Annals of the American Academy of Political and Social Science. https://doi.org/10.1177/00027162211028822
[xi] Johnson, N., Oliff, P., & Williams, E. (2011). An Update on State Budget Cuts: At Least 46 States Have Imposed Cuts That Hurt Vulnerable Residents and the Economy. Center on Budget and Policies Priorities. https://www.cbpp.org/research/an-update-on-state-budget-cuts
[xvi] McCaffery, E. J. (2019). The Death of the Income Tax (or, the Rise of America's Universal Wage Tax). USC Law Legal Studies Paper No. 18-26. http://dx.doi.org/10.2139/ssrn.3242314
[xxvi] Bhutta, N., Chang, A. C., Dettling, L. J., & Hsu, J. (2020). Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances. Board of Governors of the Federal Reserve System. https://doi.org/10.17016/2380-7172.2797
This primer is part of a series on anti-racist state budgets. To understand the concept of creating anti-racist state budgets, it is important to understand the difference between racist and anti-racist ideas and policies. The following excerpts are from How To Be An Antiracist (2019) by Ibram X. Kendi:
Racist vs. Anti-Racist Ideas
A racist idea is any idea that suggests one racial group is inferior or superior to another racial group in any way. Racist ideas argue that the inferiorities and superiorities of racial groups explain racial inequities in society … An antiracist idea is any idea that suggests the racial groups are equals in all their apparent differences—that there is nothing right or wrong with any racial group. Antiracist ideas argue that racist policies are the cause of racial inequities.
Racist vs. Anti-Racist Policies
A racist policy is any measure that produces or sustains racial inequity between racial groups. An antiracist policy is any measure that produces or sustains racial equity between racial groups … There is no such thing as a nonracist or race-neutral policy. Every policy in every institution in every community in every nation is producing or sustaining either racial inequity or equity between racial groups.
For additional race-equity concepts and definitions, please visit the Racial Equity Tools glossary.
Introduction
We all benefit when public policies move us closer to realizing our nation’s promise of full and equal opportunity for all. Social safety net programs that help people get back on their feet during hard times and build thriving communities have proven that ending poverty is within reach. To continue our march toward prosperity for all, we must first confront and dismantle a long history of racism and discrimination in our nation’s response to poverty.
For decades, the modern social safety net has kept millions of Americans out of poverty, many of them children. These public assistance programs represent our shared investment in ensuring that all families, regardless of their income, can keep food on the table and go to work knowing that their children are in a safe and enriching environment. Without our social safety net, 37 million more Americans, including 7 million children, would be living in poverty.
Public assistance programs were originally designed as temporary supports for those who fall on hard times, but more and more, they have supplemented the earnings of workers trapped in a lopsided economy rigged in favor of the wealthy and large corporations at the expense of the working class. Walmart, for example, employs the most workers receiving SNAP, leaving taxpayers on the hook for $6.2 billion annually to help their workers make ends meet and access healthcare, all while using tax breaks and loopholes to avoid an estimated $1 billion in federal taxes each year.
In this report, we consider state policy changes to the Temporary Assistance for Needy Families (TANF) program, the Supplemental Nutrition Assistance Program (SNAP), and the child care subsidy program. Though there are additional safety net policies that state lawmakers can consider, like tax credits for low-income families, school nutrition and early childhood programs, or housing assistance, in this report, we focus on three federally funded, means-tested assistance programs that are generally administered through state human services agencies.
Temporary Assistance for Needy Families (TANF) is a federal block grant states can use to provide direct cash assistance to needy families. States must maintain a certain level of state funding toward the program to receive federal funds. With a block grant program, states have significant flexibility in the use of federal and state TANF funds and in the administration of TANF cash assistance benefits. Many states also use TANF funds to support other non-cash assistance programs, including job training programs, childcare, and child welfare services.
The Supplemental Nutrition Assistance Program (SNAP) is a federal entitlement that provides nutritional assistance to low-income individuals. Unlike a block grant program, the federal government fully funds SNAP benefits for all eligible enrolled individuals. The federal and state governments are each responsible for half of the administration costs. Compared to other public assistance programs, states have far less flexibility in administering SNAP.
The Child Care and Development Fund (CCDF) is a federal block grant that supports state childcare assistance programs and provides subsidies to low-income families. States must contribute a certain level of state matching funds to receive federal funds each year. Access to, and eligibility for, childcare assistance varies significantly across states.
The Pervasive Legacy Of Racism In The Social Safety Net
Jana Shea / Shutterstock.com
Public assistance programs should be accessible and effective in moving families out of poverty. But since its inception, racism has shredded the nation’s social safety net, weaving in discriminatory policies designed to leave out Black families and other families of color. Over time, these policies have not only failed the people they were intended to exclude, but they have also left all communities worse off for generations.
A Brief History of Racism in the Social Safety Net
The construction of arbitrary obstacles to prevent people of color from accessing social welfare programs is as old as the nation’s first safety net policies. Federal and state lawmakers have turned anti-poverty policy on its head, using it not to help those living in poverty, but as a tool to preserve a racist economic system dependent on the exploitation of Black workers and other workers of color. Though not a comprehensive historical overview, the following racist ideas and movements were instrumental in the design of the modern social safety net:
Work Requirements. Work requirements in public assistance programs were born out of the same desire to coerce Black people into the low-wage and unstable labor force that propped up white supremacy. In the centuries after the Civil War, enslavers and the beneficiaries of slavery continued to exploit the labor of Black people through new institutions and policies that were “slavery by another name,” like convict leasing, vagrancy laws, and sharecropping. In 1935, the creation of the first federal welfare program, Aid to Dependent Children (ADC), continued this legacy with language that allowed states to consider “moral character” as an eligibility requirement. In practice, this allowed states to impose de facto work requirements by denying assistance to Black women and forcing them into underpaid and backbreaking jobs, while providing assistance to stay-at-home white mothers. Even as modern federal public assistance programs took shape in the late 1960s, one U.S. senator interrupted Johnnie Tillmon, a Black mother and leading welfare rights activist who was unable to access assistance to feed her children when she fell ill, during a congressional hearing to complain that he could no longer find someone to iron his shirts because of welfare.
The “Culture of Poverty” Myth. The transformation of public discourse on poverty into a personal problem to be resolved through personal responsibility, instead of a collective problem rooted in centuries of structural inequality in social and economic systems, paved the political path for punishing reforms to public assistance programs. The change in public narrative about the “deserving poor,” which was driven by racist and gendered stereotypes about welfare recipients, allowed politicians to discuss and advance policies that appeared race-neutral while still conjuring anti-Blackness as a means to tighten access to public assistance.
The cumulative result of decades of racist policymaking in the social safety net has undermined its effectiveness in reducing poverty and helping families achieve long-term financial security. The decentralization of TANF administration with the passage of the PRWORA left recipients at the mercy of states with a long history of political and economic disenfranchisement of people of color. Nearly three decades later, the unmistakable legacy of the 1996 reforms was its orchestration of a flawed response to child poverty that disproportionately failed the nation’s Black children. Indeed, research shows that the least accessible and least generous cash welfare programs are in states with higher shares of Black residents. By one estimate, equalizing the differences in how states use TANF funds to address poverty would narrow the Black-white child poverty gap by 15 percent.
While many of the changes contained in the PRWORA had the effect of reducing access to the safety net for Black families and other families of color, the changes have undermined our nation’s efforts to reduce poverty overall. Research shows that in the long term, the changes contained in the PRWORA failed to improve the well-being of families in poverty. Additionally, the work-centric reforms to the social safety net resulted in an alarming long-term trend: growing shares of families living in deep poverty. Fifteen years after PRWORA, the share of households living on less than $2 per day had increased by 153 percent. The rise in deep poverty was especially pronounced for children of color: in the first ten years after the 1996 changes, the percentage of Black children in deep poverty increased from 4.1 percent to 5.8 percent, and from 5.8 percent to 6.8 percent for Latinx children, while the deep poverty rate declined slightly for white children.
Building an Anti-Racist Social Safety Net
We all have a role in ensuring that no child goes hungry, that parents can afford the childcare they need to go to work, and that families living in poverty have what they need to make ends meet. Policymakers have the power to confront and dismantle the legacies of racism in their states’ public assistance programs. At the state level, there are significant opportunities to reverse harmful policies of the past and make investments in policies to strengthen the reach of the safety net:
Strengthening the Temporary Assistance for Needy Families (TANF) program, which was significantly weakened when lawmakers turned the program into a block grant in 1996. This led directly to the shrinking of direct assistance to families in poverty. In 2019, only 23 families received cash assistance through TANF for every 100 families in poverty, though some states reached far fewer families. States have considerable flexibility in the use of TANF funds, and lawmakers should prioritize efforts to increase investments in direct cash assistance to families with low incomes and remove barriers to eligibility for assistance.
The Supplemental Nutrition Assistance Program (SNAP) reaches an estimated 84 percent of eligible people, though the participation rate in 19 states was significantly lower than the national average. Though some requirements are set at the federal level, state lawmakers can maximize access to SNAP by adopting a range of eligibility and administrative policies that increase the accessibility of the program.
The Child Care and Development Block Grant (CCDBG) provides broad flexibility to states in designing their childcare subsidy programs, resulting in significant discrepancies in eligibility requirements from state to state. Nationally, only 12 percent of potentially eligible children received subsidies based on state eligibility limits. State legislators can expand investments in childcare assistance programs and reduce administrative and eligibility barriers to accessing assistance.
When considering ways to build an anti-racist social safety net, state legislators should refer to the following recommendations and work with national and local advocates, especially groups that center race equity, to develop the best policies for their states, which may include administrative solutions in addition to the legislative options highlighted below.
TANF Family Cap
During the height of welfare changes in the 1990s, 24 states adopted “family cap” policies that punished families receiving cash assistance through TANF for having another child. Without any evidence beyond racist and sexist stereotypes of welfare recipients, proponents of family caps falsely claimed that cash assistance programs incentivized low-income mothers to have more children to receive additional public assistance.
In Connecticut, families with children born after the initial ten months of receiving TANF cash assistance receive a 50 percent reduction in the benefit. Additionally, families with children born within ten months of program participation are prohibited from qualifying for an exemption from program time limits. A bill (2021 CT HB 6635) that was recently introduced, but failed to advance, would have eliminated both family cap penalties.
Work requirements and penalties are used more harshly against Black and Latina women than white women, and ample evidence shows that work requirements have failed to increase employment and reduce poverty among participants. For the most part, adults receiving TANF and SNAP are subject to work requirements under federal law, but states have some flexibility in both programs to establish exemptions, set the severity of sanctions, and define work activities.
TANF Sanctions
In the TANF program, states have broad authority to determine sanctions for non-compliance with work requirements that range from an initial warning to penalties as severe as immediate case closure and a loss of benefits. All but three states—California, New York, and Vermont—adopted full-family sanctions that cut off benefits to the entire family. In recent years, several states have repealed these harsh sanctions and no longer prevent children from receiving benefits for work-related sanctions.
The District of Columbia amended (2017 D.C. Law 22-33, § 5002/D.C. Code § 4-205.19f) its TANF non-compliance sanctions to minimize the impact of a benefit reduction on children by capping the sanction at 6 percent of the total benefit amount.
Illinois lawmakers enacted a bill (2019 IL HB 3129) that designated 75 percent of the TANF benefit for the children in a household and 25 percent for adult members, and provided that no part of the benefit designated for children shall be reduced due to a sanction. Under the new law, sanctions for cases of non-compliance are limited to 30 percent of the adult portion of a benefit.
Legislation (2020 MD SB 787/HB 1313) enacted in Maryland establishes a similar designation of benefits for children and adults, and limits the reduction of benefits for non-compliance to 30 percent of the adult portion, and prohibits the reduction or termination of any portion of the child or children’s benefit.
In Maine, lawmakers enacted a bill (2021 ME LD 78) to repeal the state’s full-family sanctions and limit the termination of benefits to the non-compliant adult and allow the children and compliant parents to continue receiving benefits.
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SNAP Requirements and Sanctions
In SNAP, most adults must comply with basic work-related requirements, such as registering for work or not voluntarily leaving a job. States can require participation in job training activities, which range from job search requirements to educational programs, in addition to setting the number of hours required. Employment and training (E&T) programs must meet some federal requirements, but states have broad latitude in program design. Many states enroll participants in E&T programs on a voluntary basis, which is more effective than mandatory programs.
States can also set sanctions and disqualifications for SNAP recipients who fail to comply with work requirements. There are federal minimums for disqualification that apply only to the individual who is out of compliance (which allows the household to receive a reduced benefit amount), starting with a 1-month sanction for the first instance, and escalating to 6 months for the third instance. States can use the minimum, or use some combination of a longer disqualification period, or extend the disqualification to the entire household. The range of sanctions includes 26 states that use the federal minimum, and the most punitive state, Mississippi (Miss. Code Ann. § 43-12-37), which applies sanctions against an entire household and imposes a permanent sanction for non-compliance after the third instance.
Legislation introduced in Texas (2021 TX SB 1912/HB 1353) would roll back the state’s disqualification policy to the federal minimum by allowing a household to continue to receive benefits when an individual is out of compliance.
Similar legislation was introduced, but failed to pass, in Nebraska (2020 NE LB 1037) to limit the disqualification to the non-compliant household member.
TANF and SNAP Bans on Individuals with Prior Drug-Related Felony Convictions
The federal lifetime ban on individuals with drug-related felony convictions gave states the option to opt out of or modify the ban through state legislative action. Not only does the ban establish a lifetime punishment for a drug conviction, but it also effectively extends the punishment to the children and family of the individual, as the household receives a smaller benefit as a result of the ban.
Many states have lifted the ban in either or both programs, while others have modified their bans to limit those affected by narrowing the types of felonies, shortening the length of the ban, or providing an exception for those that have successfully completed treatment or parole requirements.
Legislators in Illinois (2021 IL HB 88) and South Dakota (2020 SD SB 96) enacted legislation to lift the ban in TANF, lawmakers in Michigan approved a bill (2020 MI SB 1006) to lift the ban in SNAP, while lawmakers in Kentucky (2021 KY HB 497) and Virginia (2020 VA SB 124/HB 566) enacted legislation to lift the bans in both programs.
A bill (2021 NV AB 138) enacted by Nevada lawmakers would lift the bans in both SNAP and TANF. Under current law, the state’s modified bans require participation in, or successful completion of, a substance use disorder treatment program, which can be costly and difficult to access.
Drug testing requires a reasonable basis or suspicion; Michigan and Florida enacted “suspicionless” drug testing for TANF applicants and recipients, which required drug testing without reasonable suspicion of drug use, that were later rejected by courts as a violation of the Fourth Amendment. Subsequently, at least 13 states currently require applicants to submit to drug screening questionnaires that are used, along with other information, including criminal history records or even “visual observations” by agency staff, as a basis for reasonable suspicion to require drug testing. Drug screening and testing policies are also costly and ineffective; an analysis of 13 states with existing drug testing policies found that, collectively, the states spent over $200,000 and identified only 338 positive tests, or 1 percent of all applicants.
Legislators in Utah enacted a bill (2016 UT HB 172) that, as introduced, would have repealed the state’s drug screening and testing requirements. As amended, TANF applicants who are screened as likely drug users would be required to take a drug test only upon the recommendation of a licensed clinical social worker.
In Wisconsin, the 2021-23 Executive Budget (2021 WI AB 68/SB 111) proposed by Governor Evers would repeal the state’s drug screening and testing requirements in the SNAP Employment and Training program, but lawmakers declined to include the recommendation in the final enacted budget.
Child Support
Cooperation with child support enforcement is required at varying degrees within the social safety net as a cost recovery mechanism, but many non-custodial parents cannot keep up with payments. A quarter of non-custodial parents live in poverty, and 300,000 of them fell into poverty from paying child support. Children with parents living outside of the home are much more likely to be living in poverty and are more likely to be Black or Latinx. As a result, child support enforcement efforts leave low-income children no better off, since the payments collected are oftentimes reimbursed to the state and not the child, while pushing non-custodial parents into financial precarity and debt.
Under federal law, subject to good cause exemptions, families must cooperate with child support enforcement programs to receive TANF benefits. For SNAP and childcare subsidy recipients, states can require both custodial and non-custodial parents receiving benefits to cooperate with child support enforcement and impose their own sanctions for failure to cooperate.
Child Support Pass-Through and Disregard in TANF
As a condition of receiving TANF benefits, applicants must cooperate with child support enforcement agencies in establishing and collecting support. Child support payments collected on behalf of current TANF participants are shared between the state and federal governments, but the federal government waives its share for child support that is passed through to the family and disregarded as income for eligibility purpose, up to $100 per month per child, or $200 for two or more children.
Half of the states keep all of the child support and do not pass it to the family, but in 26 states, the state agency collects child support payments on behalf of children receiving TANF, but then passes the payment, fully or partially, onto the child. Pass-through policies provide a meaningful boost to TANF recipients, who receive benefits that are woefully inadequate and have been declining relative to the cost of living over the years. Researchshows that pass-through policies incentivize cooperation for non-custodial parents while also increasing compliance with child support orders among non-custodial parents.
Many states’ pass-through policies reflect the amounts waived by the federal government, while others pass through smaller amounts, and some pass through the full amount collected to the TANF family, above the federal amount waived.
Legislators in Colorado enacted a bill (2015 CO SB 15-012) to allow TANF recipients to receive the full amount of the child support that the state collects on their behalf, in addition to ensuring that the additional payments are not counted as income for eligibility in the program. In a recent study, the state’s Department of Human Services reported that the average family received an increase of $167 per month. The state also reported that monthly child support collections increased by 76 percent in the first 18 months of implementation.
Maryland enacted legislation (2017 MD SB 1009/HB 1469) to allow up to $100 per child, or $200 for two or more children, to be passed through to TANF recipients, and to disregard the payment for eligibility for the program.
In New Jersey, a bill (2021 NJ S 2329/A 3905) that was vetoed by the governor would have allowed a portion of child support to be passed through to TANF families, in addition to excluding the pass-through amount from the program’s definition of income.
Child Support Sanctions for SNAP and Child Care Subsidies
States can also choose to impose child support-related sanctions for SNAP and childcare subsidy recipients. Severe sanctions for non-cooperation can have dire consequences, including a loss of subsidies that help parents afford childcare, or reduced food assistance and increased food insecurity for children. Although most states have good cause exemptions for non-cooperation, such as in cases of domestic violence, concerns about how child support enforcement may affect their family relationships can leave some families reluctant to participate.
In Mississippi, where custodial parents can be disqualified from receiving SNAP for failure to cooperate, and non-custodial parents can be disqualified for being in arrears with court-ordered child support payments, legislators considered, but failed to pass, a bill (2020 MS HB 1319) that would have repealed the state’s SNAP enforcement requirements. The state also requires child support enforcement cooperation for child care eligibility, and failed to advance a bill (2021 MS HB 65) that would have eliminated the requirement in the program.
Kansas legislators are considering a bill (2021 KS HB 2371) that would eliminate the requirement for child support enforcement cooperation for SNAP and child care subsidy applicants.
Time Limits in TANF
The passage of the PRWORA in 1996 instituted a dramatic federal 60-month lifetime limit for receiving TANF benefits, though states can—and several states do—impose a shorter limit. Enabled by racist narratives about welfare recipients, proponents argued that the policy would force recipients to find jobs, ignoring the reality that many TANF recipients, especially Black and Latina mothers, face steep and systemic barriers—employment and skills gaps, employment discrimination, lack of access to reliable transportation—to stable jobs that pay enough to make ends meet. Indeed, research shows that time limits are ineffective and do not result in increased long-term earnings.
State lawmakers can ease time limit penalties by providing extensions beyond the 60 months for up to 20 percent of the caseload, by stopping the clock on the time limit for certain groups of families, and continuing benefits for children beyond the time limit. Additionally, state TANF funds are not limited by the federal 60-month limit, so states can use funding flexibly to set their own time limit policies. One way to ensure that families are not punished is by using “good faith” extensions when recipients are participating in work activities but are otherwise prevented from working.
In Washington, where researchers found that time limits were most likely to penalize Black and Indigenous families, lawmakers enacted a bill (2019 WA HB 1603/Chapter 343) that expanded good faith extensions for families facing barriers to work, such as the need for mental health or substance use disorder treatment, or homelessness or risk of loss of housing. Under the new law, recipients are also eligible for an extension if they demonstrate that the time limit would cause undue hardship to the recipient or their family.
Another bill (2021 WA SB 5214) enacted by Washington legislators establishes a hardship exemption for all families receiving TANF since March 1, 2020, when the unemployment rate was equal to, or greater than, 7 percent.
A bill (2020 NJ S 2329/A 3905) that was vetoed by the governor in New Jersey would have continued benefits for children and other household members if at least one adult recipient becomes ineligible as a result of the 60-month lifetime limit.
Arizona legislators considered a bill (2021 AZ HB 2253) that would have increased the state’s lifetime limit of 12 months, the most restrictive in the country, to the federal limit of 60 months.
Asset Limits
Today, the average Black household has just 12 percent of the wealth of white households, and early data shows that the pandemic recession threatens to widen the gap. The racial wealth gap has grown over the course of centuries of discriminatory policymaking and institutional practices that built wealth for white families while preventing families of color, especially Black Americans, from achieving the same generational wealth.
Included in that broad authority are the states’ abilities to set asset limits for TANF, though in 7 states, the asset limit has remained unchanged at $1,000 in the four decades since it was first imposed at the federal level, while 8 states have eliminated the asset test altogether. While federal rules set the asset limit in SNAP at $2,250 for most households, states can establish their own limit by adopting broad-based categorical eligibility (BBCE); 37 states have utilized this option to eliminate asset tests in SNAP. In the child care subsidy program, Congress established uniformity for asset limits in 2014, when it required states to allow for self-certification that their assets did not exceed $1,000,000.
In Indiana, legislators considered, but failed to pass, a bill (2014 IN SB 413) that would have eliminated asset limits for SNAP and TANF applicants. The state is one of 14 states that has not eliminated the asset test in SNAP, and one of the seven states where the asset limit is $1,000.
Lawmakers in New York are considering legislation (2021 NY S 742/A 2214) to eliminate asset limits across all public assistance programs in the state. The state has already eliminated the asset test in SNAP, and the bill would eliminate the current asset test of $2,000, or $3,000 for households with someone age 60 or older.
States have considerable flexibility in setting income eligibility requirements across social safety net programs. Aligning income tests with a living wage ensures that people aren’t turned away from the social safety net, even when their jobs don’t pay enough to make ends meet. Rising child care costs that far outpace wages create significant employment instability for parents, especially mothers of young children. By one estimate, a nationwide increase in income eligibility for child care subsidies would result in 270,000 mothers joining the workforce.
Workers who receive a small raise or extra hours at work can also fall farther behind because they lose more in benefits than they received in increased income, in a phenomenon called the public assistance “cliff effect,” which is particularly pronounced for child care subsidies. The cliff effect forces workers into declining pay increases or promotions to maintain the benefits that allow them to pay the bills. Instead of promoting long-term financial stability, the public assistance cliff effect keeps workers on unstable financial footing, which contributes to increased administrative costs resulting from enrollees cycling on and off programs.
Why the Federal Poverty Level Fails to Measure Poverty
The official federal poverty measure (FPL) is a flawed measure that is used to determine income eligibility in some public assistance programs. The FPL is based on an outdated methodology that assumed the average American family spent a third of their household budget on food. Since its inception, its methodology has not been updated, except for annual inflation adjustments, and fails to capture variations by geography, aside from separate calculations for Alaska and Hawaii. Moreover, inflation increases for lower-income individuals significantly outpace average inflation. While there is general consensus among experts that the measure should be updated, until Congress acts to update the FPL, states have an important role in increasing income eligibility to be in line with a family-sustaining wage.
TANF Income Eligibility
States have significant flexibility in determining eligibility criteria for cash assistance programs funded by TANF dollars, resulting in wide variation in eligibility for TANF across the country. For example, a family of three in Alabama can earn no more than $268 per month to be eligible for TANF, while the same family in Minnesota would be eligible with monthly earnings of up to $2,231. States can expand access to TANF cash assistance by increasing income thresholds, adjusting income measurement methods, or allowing some portion of a household’s income to be disregarded in determining eligibility.
Lawmakers in Indiana failed to advance a bill (2021 IN SB 233) that would have increased the income threshold for TANF cash assistance to 50 percent of the federal poverty level over the course of 3 years. The bill would increase eligibility while ensuring that the threshold is updated annually as costs rise. Currently, eligibility for TANF in Indiana is based on a fixed dollar amount that was last updated in 1988.
In Maine, legislators enacted a bill (2019 ME LD 1772) to broaden income disregards in determining TANF eligibility. Prior law provided earnings disregards and childcare expenses for calculating benefit levels; the new law applies existing earnings disregards and child care expenses for the purposes of determining eligibility, in addition to significantly expanding disregards for calculating benefit levels.
SNAP Income Eligibility
Within SNAP, states have much less flexibility in setting income eligibility requirements. States that adopt broad-based categorical eligibility can increase the gross income threshold for the program above the federal minimum of 130 percent of the FPL, which 31 states and DC have already done. While some states have considered legislation to accomplish the change, the option can also be adopted through administrative means.
In Illinois, legislators approved a bill (2015 IL SB 1847) to increase the gross income limit in SNAP from the federal minimum to 165 percent of the FPL, or 200 percent for families with an elderly, blind, or disabled household member.
Minnesota lawmakers are considering legislation (2021 MN SF 759/HF 611) to increase the gross income limit for SNAP from 165 percent of the FPL to 200 percent.
Lawmakers in Nebraska overrode a gubernatorial veto to enact a bill (2021 NE LB 108) to increase the gross income threshold from 130 percent of the FPL to 185 percent. As amended and enacted, the threshold is increased to 165 percent of the FPL through September 30, 2023, and includes legislative intent language that the increase shall be funded through new federal funds provided through the American Rescue Plan Act.
Child Care Subsidy Income Eligibility
States also have broad authority to set income thresholds for childcare subsidy eligibility up to 85 percent of the state median income (SMI). Recent federal changes to index eligibility to SMI instead of FPL ensures that the threshold moves alongside economic conditions and costs within the state. There is significant variation across the country in access to child care assistance: a family of three can earn no more than 39 percent of the SMI in Nebraska to be eligible for child care subsidies, compared to 85 percent of the SMI in Arkansas, Mississippi, and Vermont.
Virginia legislators enacted a bill (2021 VA HB 2206) that temporarily increased income eligibility for child care subsidies to the federal maximum of 85 percent of the SMI if “the family includes at least one child who is five years of age or younger and has not yet started kindergarten.” The increased threshold is effective through August 1, 2021, though families who become enrolled continue to be eligible for a year.
In Iowa, lawmakers enacted legislation (2021 IA HF 302) to ease the cliff effect in the child care subsidy program by establishing a gradual eligibility phase-out to allow families to continue receiving assistance if their income is between 225 and 250 percent of the FPL, compared to current law under which families lose eligibility when they earn more than 225 percent of the FPL. The bill also establishes a higher threshold of 275 percent of the FPL for families with children needing special needs care.
State-Funded Programs for Immigrants Excluded from Federal Funds
Many states have established state-funded assistance programs for immigrants who are otherwise ineligible for federally funded programs, including cash assistance and nutrition assistance substitute programs. States can also use their portion of spending on TANF, which is already required to receive federal funds, to provide benefits to immigrants who are federally barred from eligibility until they have been in the country for five years. At least 22 states have a state-funded TANF replacement program and 6 states have a state-funded food assistance program available to some immigrants who are otherwise excluded from federally funded programs.
Legislators in California introduced a bill (2021 CA SB 464) that would extend eligibility for the state-funded California Food Assistance Program (CFAP) to any noncitizen, including undocumented immigrants. Current law restricts CFAP eligibility to specific categories of lawfully present immigrants.
New Jersey legislators enacted a bill (2020 NJ S 2329/A 3905), which received a conditional veto by the governor, that would have expanded access to TANF for lawful permanent residents, individuals granted relief through the federal Deferred Action for Childhood Arrivals (DACA) program, and any other non-citizens who are authorized to live in the United States.
In Washington, lawmakers enacted a bill (2019 WA SB 5164) to extend state-funded food and cash assistance to noncitizen victims of human trafficking and other serious crimes, and asylum seekers and their family members. Under the new law, individuals are eligible if they have filed, or are preparing to file, an application with the appropriate federal agency for their status. Prior legislation created the Food Assistance Program (FAP) and the State Family Assistance Program, which helps lawfully present immigrants who are otherwise ineligible for federally funded benefits.
Decades of systematic efforts to disassemble the social safety net have disproportionately fallen on Black children—41 percent of Black children live in states where TANF helps less than 10 families for every 100 living in poverty, and 55 percent of Black children live in states where TANF benefits are below 20 percent of the federal poverty level. Lawmakers can ensure that their states’ TANF funds are spent effectively toward reducing child poverty by increasing direct assistance to families in poverty and providing for automatic annual adjustments to benefit amounts.
A bill (2021 GA HB 92) that failed to advance in Georgia would have allowed for automatic annual increases to the maximum TANF benefit, which has been fixed at the same dollar amount for 30 years, by amending the definition of cash assistance to being “based on a standard of need that is equal to 50 percent of the federal poverty level for the applicable family size, and which equates to a maximum monthly amount equal to 75 percent of such amount for each such family size.” By tying the benefit to the FPL, which is adjusted annually, lawmakers could have reversed the declining value of benefits in the state, which has decreased by 40 percent since 1996.
In Mississippi, legislators recently enacted a bill (2021 MS SB 2759) that raises the maximum monthly TANF benefits. Though the state has the highest child poverty rate in the nation, prior to the passage of the bill, TANF benefits in the state were the lowest in the nation; under the new law, a family of three would receive a monthly benefit of $260, an increase from $170 per month.
Massachusetts lawmakers considered legislation (2019 MA S 36/H 102) to increase the monthly benefit annually by 10 percent until the benefit amount reaches 50 percent of the federal poverty level. The bill also would provide an annual adjustment thereafter to align the benefit level with 50 percent of the federal poverty level. The bill failed to advance, but the final FY 2021 budget included a one-time 10 percent increase to the state’s TANF benefit levels. Similar legislation (2021 MA S 96/H 199) has been re-introduced in the 2021 session that contemplates 20 percent annual increases, which are reflected in budgets proposed by both the House and Senate.
In Minnesota, legislators introduced a bill (2019 MN SF 905/HF 799) to increase the benefit amount by $200 gradually in $50 increments through October 2022, and require 2 percent increases annually thereafter. Though the legislation failed to advance, the final enacted biennial budget included a $100 increase to the monthly benefit amount, the state’s first increase in over three decades.
Virginia lawmakers considered a budget amendment in 2020 that would have increased the benefit amount by 18 percent annually until the standard reached 50 percent of the federal poverty level. Although the amendment was not adopted, lawmakers included one-time increases of 15 percent and 10 percent in the 2020 and 2021 budgets. The 2021 budget bill also requires the Department of Social Services to “develop a plan to increase the standards of assistance by 10 percent annually until they equal 50 percent of the federal poverty level.”
Lawmakers in Washington (2021 WA SB 5092/HB 1094) approved a 15 percent increase to benefits for TANF families in the state’s biennial budget, effective July 1, 2021.
2021-2022 Session Highlights: How States Build a Fairer Economy for Working Families
This publication was originally released on September 14, 2021 and was updated on September 1, 2022 to include highlights from the 2022 legislative session.
Background
State lawmakers across the country faced pressing and urgent issues when they convened in 2021 and 2022. Although the recent rollout of the COVID-19 vaccine drastically reduced deaths and infection rates, inequitable access to vaccines compounded existing barriers to health care and Black, Latinx, and low-income communities have reported lower vaccination rates. At the same time, the pandemic-induced economic recession is also widening the wealth gap between the average worker and the wealthy few, and workers of color and low-wage workers are the majority of essential workers—the heroes that are helping us get through this—yet continue to experience the worst and most extended employment losses.
The 2021-2022 legislation outlined below highlights how bold and forward-thinking state lawmakers are working to build a fairer economy by tackling long-standing structural inequalities that were magnified by the health and economic crises of the COVID-19 pandemic. The policy areas discussed in this publication are:
Paid Family and Medical Leave
Paid Sick and Safe Leave
Minimum Wage
Unemployment Insurance
Workers’ Compensation
Wage Theft Protections
Please note that this is neither a comprehensive policy list nor necessarily a list of the most progressive solutions on this subject; when moving forward with legislation, we recommend working with local and national advocates to craft the best solution for your state. Please reach out to SiX if you would like help connecting with national experts.
Paid Family and Medical Leave
Everyone deserves to be able to take paid time off to care for themselves and their families. Lawmakers in eleven states and DC have enacted legislation to establish a paid family and medical leave insurance (FMLI) program. In 2021, Colorado voters overwhelmingly approved a paid family and medical leave ballot measure, while lawmakers in Maryland and Delaware enacted paid family and medical leave bills in 2022. State family and medical leave insurance programs ensure that more working people can take time off from work to recover from a serious illness or care for a loved one or a new child. The federal Family and Medical Leave Act (FMLA) provides job-protected, unpaid leave to some workers. But low-wage workers who can least afford to take unpaid leave are also the least likely to have access to paid leave through their employers: 91 percent of workers in the lowest wage quartile have no access to paid family leave, compared to over two-thirds of workers in the highest wage quartile.
During the 2021-2022 legislative sessions, policymakers considered legislation to level the playing field so that all workers can afford to take time off from work to be with their families. Lawmakers considered bold policy solutions that would allow workers to take more than the 12 weeks guaranteed by the FMLA in some instances, bringing some parts of the country closer to paid family leave requirements in the rest of the world. In early-adopter states, legislators considered proposals to expand access to and eligibility for existing paid family and medical leave insurance programs.
Recently enacted legislation in Delaware (2022 DE SB 1) establishes a family and medical leave insurance program that provides workers with up to 6 weeks of paid leave in any 24-month period to address a worker's own serious health condition or that of a family member or to address the impact of a family member's military deployment. The new law also provides up to 12 weeks of paid leave during a single year to bond and care for a new child. Legislation in Maryland (2022 MD SB 275), which was vetoed by the governor but overridden by the state legislature, establishes a family and medical leave insurance fund to provide up to 12 weeks of paid benefits to workers for the purpose of caring for a newborn or newly fostered or adopted child, caring for the covered individual or a family member with a serious health condition, or caring for a U.S. service member or dealing with issues arising from their deployment. An additional 12 weeks of paid benefits in a year if the worker needs to address another serious health condition or to care for another new child.
A bill enacted in South Carolina (2022 SC SB 11) provides six weeks of paid family leave for state employees after the birth of a “newborn biological child” or after the initial placement of a foster child with them.
In Arizona, lawmakers introduced but failed to advance legislation (2021 AZ HB 2858) that would have provided up to 26 weeks of medical leave and up to 24 weeks for parental, caregiving, exigency (family leave related to active duty deployment), and safe leave. The new insurance program, funded by employee and employer contributions, would have adopted a progressive wage replacement structure, which ensures that lower-wage workers receive a larger portion of their wages. The bill would have established enforcement protections, including the right to bring a lawsuit for aggrieved workers. A similar package (2022 AZ SB 1644/HB 2767) was reintroduced by Arizona legislators in 2022.
In Illinois, lawmakers introduced a bill (2022 IL HB 5029) that would provide up to 26 weeks of paid family and medical leave, including leave related to a public health emergency or other disaster, and an additional 26 weeks for individuals for leave taken in connection with pregnancy, recovery from childbirth, or related conditions. Importantly, the bill includes certain domestic workers and contractors in its definition of covered workers, and includes a three-part test, or ABC test, for independent contractors.
Under a bill proposed in Pennsylvania (2021 PA SB 580), workers would be able to access up to 20 weeks to welcome a new child into their family or to recover from a serious health condition, while workers who need to care for a family member with a serious health condition would be able to take up to 12 weeks. Workers would receive a portion of their wages replaced through a new employee-funded insurance pool.
North Carolina legislators are considering a bill (2021 NC SB 564/HB 597) that would allow workers to take up to 18 weeks to recover from a serious health condition; 12 weeks to welcome a new child, to care for a family member with a serious health condition, or for exigency leave; and 26 weeks to provide care for a servicemember with a serious injury or illness.
Lawmakers Work to Expand Paid Leave in Pioneering States
Establishing an Inclusive Definition of “Family Member”
A bill (2021 NY S 2928/A 6098) enacted by lawmakers in New York would amend the state’s existing definition of family member for the purposes of caregiving leave to include siblings, defined as “a biological or adopted sibling, a half-sibling or stepsibling.”
Policymakers in Washington approved legislation (2021 WA SB 5097) to expand the definition of “family member” in the state’s existing paid family and medical leave program, which was limited to “a child, grandchild, grandparent, parent, sibling, or spouse of an employee,” to include “any individual who regularly resides in the employee’s home or where the relationship creates an expectation that the employee care for the person, and that individual depends on the employee for care.”
In California, a bill (2021 CA AB 1041) enacted by legislators and awaiting the governor's signature would create a more inclusive definition of family by striking a provision that allows “any other individual related by blood or whose close association with the employee is the equivalent of a family relationship” and replace it with a “designated person,” defined as “a person identified by the employee at the time the employee requests family care and medical leave.”
Increasing Wage Replacement Rates
A bill (2020 CA AB 123) that was approved by lawmakers, but vetoed by the governor in California would have ensured that more workers, especially lower-wage workers, can afford to take paid leave. The bill would have increased the wage replacement rate for workers earning less than 33 percent of the statewide average wage from 70 percent of their wages to 90 percent of their weekly wages based on their highest-earning quarter.
Leave for Bereavement, Miscarriages, and Stillbirths
Legislators in Washington enacted a bill (2022 WA SB 5649) to expand the state’s existing paid family and medical leave program to include up to seven days of bereavement leave for the death of a family member for whom a worker would have qualified for medical leave or parental leave. The bill also made clarifications on the use of medical leave in the postnatal period, required the publication of a current list of all employers that have voluntary plans under the state paid family and medical leave program, and established new forms of legislative oversight over the program.
A California bill (2021 CA AB 867) would amend existing definitions in the state’s family leave program to provide “leave for a parent who was pregnant with a child, if the child dies unexpectedly during childbirth at 37 weeks or more of pregnancy.”
Paid Leave During a Public Health Emergency
Oregon legislatorsenacted a bill (2021 OR HB 2474) that expands the state’s paid family leave program to include leave required to provide child care due to the closure of a school or child care provider as a result of a public health emergency. The bill also expands eligibility for paid leave benefits during a public health emergency and provides eligibility to workers who are laid off and rehired within 180 days.
Washington lawmakers enacted a bill (2021 WA HB 1073) to provide “pandemic leave assistance employee grants” for workers, particularly part-time workers, who were unable to meet the hours-based eligibility threshold for the program. The bill also provides grants to small businesses for costs associated with an employee who has or will take leave under the new grant program. The program is funded entirely by federal funds received by the state in the American Rescue Plan and expires on June 30, 2023.
In Massachusetts, a bill (2021 MA H 2017) introduced by lawmakers would expand the state’s existing paid leave program to include medical leave “due to his or her potential exposure to a pathogen for which a public health emergency has been declared by the Federal, State, or local authorities, regardless of whether the covered individual is symptomatic or asymptomatic.” Self-quarantine as advised by a health care provider for one individual would apply to all other members of the same household.
No one should have to choose between their health or the health of their family and a paycheck. The COVID-19 crisis has underscored how worker health and well-being affects us all. In 13 states and DC, workers can earn paid sick time to recover from an illness or to care for a sick family member without worrying about losing their job; 12 states and DC also provide safe leave coverage for workers who need time off to attend to their needs or a family member’s needs if they are a victim of domestic violence, sexual assault, or stalking. State legislation to guarantee paid sick and safe days keeps families and workplaces healthy, especially for low-wage workers and workers of color, who are least likely to have access to a single paid sick day at their job.
State lawmakers considered legislation during the 2021-2022 sessions to expand access to paid sick and safe leave for workers on a permanent basis, in addition to a flurry of activity in response to the COVID-19 pandemic. New Mexico became the 14th state to enact a paid sick leave law, while other states created emergency sick leave protections for workers during public health emergencies.
States Continue to Lead the Way in Guaranteeing Paid Sick Leave
New Mexico became the latest state to protect the health of workers when the legislature enacted the Healthy Workplaces Act (2021 NM HB 20), which allows workers to take up to 64 hours of paid sick time each year to care for themselves or a loved one. The bill includes strong protections for broad access to leave for workers who are often excluded, including part-time, seasonal, or temporary workers, in addition to establishing financial and legal penalties for employer violations of the act, including misclassification of workers as independent contractors.
Rhode Island legislators enacted a bill (2021 RI SB 434/HB 6011) to amend the state’s existing paid sick time law, which already allows workers to earn up to five days of sick and safe time per year, to include workers in the construction industry who may lose their accrued benefits when moving between short-term projects. Under the new law, construction employers that are a part of multi-employer collective bargaining agreements must adhere to the state’s paid sick time law and would be required to contribute to a central trust for benefits available to workers under the agreement.
The Virginia legislature enacted a bill (2021 VA HB 2137) to guarantee paid sick leave to home health workers who provide care for patients who are enrolled in Medicaid. Eligible workers can accrue and use up to 40 hours of paid sick leave every year. The original bill, as introduced, would have applied the new protections more broadly to essential workers.
Lawmakers in the Minnesota House approved a bill (2021 MN HF 41) that ultimately failed to pass that would have allowed eligible workers to earn at least one hour of paid sick and safe time for every 30 hours worked, up to 48 hours per year. Under the bill, workers would be able to carry over up to 80 accrued hours from year to year, but would be limited to a total of 80 hours of accrued but unused time unless otherwise permitted by an employer.
Legislators in Connecticut failed to advance a bill (2021 CT HB 6537) that would have added all private sector workers, including domestic workers, to those eligible for sick leave. Current law only applies to certain service workers at employers with 50 or more employees. The bill also increases the rate of accrual and eliminates the waiting period for use of leave. Finally, the bill expands the definition of “family member,” which is currently limited to children and spouses, to include adult children, siblings, parents, grandparents, grandchildren, and anyone else related by blood or affinity.
Lawmakers in Iowa are considering a bill (2021 IA HF 275) that would provide paid sick and safe time up to 83 hours per calendar year. Under the bill, workers would be allowed to carry over sick and safe time from year to year up to the annual maximum. In addition to sick and safe leave, workers would be entitled to use such leave during public health emergencies when their place of work is closed for caregiving needs resulting from closure of a school or place of care or to provide care for a family member under quarantine orders.
In New Hampshire, lawmakers are considering legislation (2021 NH SB 67/HB 590) to guarantee that workers, including part-time workers, can earn 1 hour of paid sick and safe time off for every 30 hours worked. Under the bill, workers would be able to accrue and use up to 72 hours of sick or safe leave each calendar year. The bill also provides civil penalties for employer violations and a private right of action for workers who are denied sick leave or receive retaliation from employers for using sick leave.
Policymakers in Illinois introduced legislation (2021 IL HB 3898) that would provide at least 40 hours of paid sick and safe leave to full-time and part-time employees, who would accrue 1 hour of leave for every 40 hours worked. A three-part test for independent contractors is also included in the definition of “employee” under the bill to avoid employee misclassification.
States Move to Protect Worker Health During Public Health Emergencies
In California, where workers already have access to paid sick days, lawmakers enacted a bill (2021 CA SB 95) to establish up to 80 hours of supplemental paid sick leave for workers who are unable to work or telework due to COVID-19 through September 30, 2021. The new leave protections apply to employers of more than 25 employees, and workers can use the leave for quarantine, to receive and recover from a vaccine, to recover from COVID-19, to care for a family member subject to quarantine or isolation, or to care for a child whose school or place of care is closed due to COVID-19.
The Massachusetts legislature approved a bill (2021 MA H 90) to expand access to emergency paid sick leave. The bill would have guaranteed workers access to 40 hours of emergency sick leave for full-time workers and an equivalent amount for part-time workers. Workers would receive their full pay for leave taken for reasons related to COVID-19, including caring for a family member. The bill established a state fund to reimburse employers not eligible for the federal reimbursement under Families First Coronavirus Response Act. Although the bill was returned with amendments by the governor, lawmakers rejected the amendments and passed another bill (2021 MA H 3702) with the emergency sick leave provisions.
A bill (2021 MD SB 727/HB 1326) that failed to pass in Maryland would have amended the state’s existing sick and safe leave protections to provide public health emergency leave. The bill would have provided 112 hours of leave for full-time workers during a public health emergency and would have expanded eligibility for the state’s permanent paid sick and safe leave law to agricultural workers, temporary staffing or employment agency workers, or on-call workers. Finally, the bill would have amended the existing definitions of “family member” and “spouse.”
Pennsylvania legislators introduced a bill (2021 PA HB 657) to establish 112 hours of public health emergency leave for full-time workers. Part-time workers would also be eligible for paid sick time equal to the amount of hours worked on average in a 14-day period. The leave would be available to workers for themselves, to provide care for a family member, for instances where their place of business is closed, or to provide child care when a school or place of care has been closed.
For too many workers, wages haven’t kept pace with the cost of rent, health care, child care, and other basic household expenses. While the federal minimum wage has remained at $7.25 since 2009 and the federal subminimum wage for tipped workers at $2.13 since 1991, 30 states and DC have approved a higher state minimum wage, in addition to 45 localities that have enacted a minimum wage higher than the state minimum wage. Increasing the minimum wage ensures that workers can support their families while also narrowing the racial and gender wage gap that disproportionately leaves workers of color, especially Black women, in jobs that don’t pay enough to make ends meet.
In 2021-2022, state legislators across the country considered legislation to raise the minimum wage, address the erosion of minimum wage values by requiring automatic adjustments for inflation, eliminate or raise the subminimum wage for some workers, and repeal state preemption laws that prevent local governments from taking action to increase the minimum wage above the state minimum wage.
State Lawmakers Take Action to Raise the Minimum Wage for More Workers
Lawmakers in Delaware enacted a bill (2021 DE SB 15) that would gradually increase the state minimum wage from $9.25 per hour in 2021 to $15 per hour by 2025.
A recently enacted bill in Hawaii (2022 HI HB 2510) ramps up the state’s minimum wage every two years from the current $10.10 per hour (75 cents for tipped workers) to $18 per hour by the start of 2028 ($1.50 per hour for tipped workers). This law also makes the state’s earned income tax refundable.
Rhode Island legislators also enacted a bill (2021 RI SB 1) increasing the state minimum wage gradually from $11.50 to $15 by 2025.
Arizona lawmakers failed to advance a proposal (2021 AZ SB 1758) that would have increased the state minimum wage for all workers to $20 starting on January 1, 2022, and increased it on an ongoing basis for inflation. The bill would have allowed tipped employees to be paid $3 less per hour than the minimum wage if their employer can prove the tips their employees receive make up the difference.
In Georgia, lawmakers are considering a minimum wage increase to $15 starting in 2022. A bill (2021 GA HB 116) under consideration in the House incorporates this wage increase but allows employers to count tips toward 50 percent of employees’ minimum wage, and it exempts small employers, students, newspaper carriers, and caretakers. The Senate companion bill (2021 GA SB 24) also establishes a yearly cost-of-living adjustment to the minimum wage starting in 2023.
A bill (2021 IA HF 122) introduced by Iowa lawmakers would increase the state minimum wage gradually to $15 by July 2025, and to $13.20 for employees employed for less than 90 days by July 2025. The bill also establishes annual cost-of-living increases beginning in July of 2026.
In Minnesota, lawmakers are considering a bill (2021 MN SF 2031) to raise the state minimum wage starting in 2022. Larger employers with more than $500,000 in gross sales must pay employees a minimum wage of $17 per hour, while smaller employers who do not meet this requirement must raise their wages to $15 per hour. After 2022, this minimum wage is adjusted annually, using the cost of inflation.
Legislators in North Carolina are considering legislation (2021 NC HB 612/SB 673) to increase the minimum wage to $15 per hour by 2023 with a cost-of-living adjustment implemented starting in 2024.
Ohio lawmakers are considering a bill (2021 OH SB 51) that would increase the state minimum wage to $12 by 2022 and provide for gradual increases by $1 annually until the minimum wage reaches $15 in 2025. The state minimum wage is adjusted annually thereafter for inflation.
Oregon lawmakers failed to advance a bill (2021 OR HB 3351) that would have increased the state minimum wage to $17 per hour starting on July 1, 2022. The bill would have also provided an annual cost-of-living adjustment beginning on July 1, 2023.
In Texas, lawmakers failed to advance a bill (2021 TX HB 615) that would have raised the state minimum wage to $11.25 in 2022 and $15 in 2023. Starting in 2024, the minimum wage would increase with a cost-of-living adjustment. The bill also would have established that tipped workers must be paid at least 50 percent of the base minimum wage.
Eliminating Exemptions to Minimum Wage Protections
Minimum wage laws apply to most workers, but employers are allowed to pay less than the federal minimum wage in some instances. Under federal law, employers can pay workers with disabilities and student workers or workers in training a subminimum wage by obtaining a special certificate. For workers who typically receive tips—a racist custom rooted in slavery that continues to harm Black service workers today—employers are only required to pay the federal tipped minimum wage of $2.13. Thirty-four states and DC have increased the minimum wage for tipped workers, while 16 states continue to use the federal tipped minimum wage, which was last updated in 1991. Another direct legacy of slavery, prison labor, allows incarcerated individuals, who are disproportionately Black, to work for little to no wages.
Tipped Workers
Idaho lawmakers failed to advance a bill (2021 ID SB 1028) that would have gradually raised the minimum tipped wage to $7.50 by July 1, 2023.
Lawmakers in Nebraska (2021 NE LB 122), New York (2021 NY A 4547), Rhode Island (2021 RI HB 6012), and Wisconsin (2021 WI AB 278/SB 286) all considered legislation that would gradually raise the tipped minimum wage to align with the state minimum wage for all workers over the course of several years.
Legislators in North Carolina are considering legislation (2021 NC HB 612/SB 673) to repeal sections of existing state law that exempt agricultural and domestic workers from minimum wage and overtime protections. The bill would also increase the tipped minimum wage and gradually phase it out by 2025.
Individuals with Disabilities
Colorado lawmakers enacted a bill (2021 CO SB 21-039) to phase out subminimum wage for workers with disabilities by July 1, 2025, and require each employer to submit a transition plan to the Colorado Department of Labor and Employment detailing how the employer plans to comply.
Rhode Island enacted a bill (2022 RI HB 7511/SB 2242) to repeal the subminimum wage for workers with physical or mental disabilities, thereby requiring the state’s minimum wage instead. A similar bill (2021 HI SB 793) was passed by lawmakers in Hawaii.
New York lawmakers are also considering legislation (2021 NY S 1828/A 3103) that would eliminate provisions exempting employees with disabilities from the minimum wage law.
Legislation in South Carolina (2021 SC SB 533) introduced in 2021 and enacted in 2022 removes the subminimum wage for employees with disabilities and instead requires that they be paid at least the federal minimum wage. Similar legislation enacted in Tennessee (2022 TN SB 2042) provides for the federal minimum wage as the floor wage instead of a subminimum wage.
In California, lawmakers enacted a bill (2021 CA SB 639) directing a state agency to develop a plan to phase out the use of subminimum wages for disabled workers by 2025. Delaware lawmakers enacted a bill (2021 DE HB 112) to phase out the subminimum wage for disabled workers by July 1, 2023.
Employees in Training
The Delaware General Assembly enacted a bill (2021 DE HB 88) to remove the training minimum wage (for employees in their first 90 days on the job) and the youth minimum wage (for employees under the age of 18).
Nebraska passed a new law (2022 NE LB 1012) that raises the minimum wage for student interns from the federal minimum wage to the state’s $9 hourly minimum wage, with state grants to support employers with less than 50 FTE employees.
Idaho lawmakers failed to advance a bill (2021 ID SB 1028) that would have eliminated the training wage of $4.25 for the first 90 days of employment for workers under 20 years old.
Individuals in Prison
Enacted legislation in Colorado (2022 CO SB 50) will increase the minimum wage for prison labor in correctional facilities from the federal minimum wage to the state’s minimum wage. In Washington, lawmakers enacted a bill (2022 WA HB 1168) to require that inmate forest fire suppression and support crews be paid no less than the local minimum wage.
In Arizona, lawmakers failed to advance legislation (2021 AZ SB 1751) that would have raised the minimum wage for individuals in prison from $1.50 to match the federal minimum wage. The bill would have also increased the maximum balance that incarcerated individuals can hold in their spending accounts.
States Consider Rollbacks of Local Minimum Wage Preemptions
In 26 states, state law prohibits local governments from setting a minimum wage that is higher than the state minimum wage. During the 2021 legislative session, lawmakers in Florida (2021 FL SB 304/HB 6031), Georgia (2021 GA HB 499), Idaho (2021 ID S 1028), Indiana (2021 IN SB 334), Missouri (2021 MO HB 409), Oklahoma (2021 OK SB 101), and Texas (2021 TX HB 224/SB 389) introduced but failed to advance legislation that would have repealed the state’s minimum wage preemption law. Pending legislation to roll back minimum wage preemption laws are also pending in Iowa (2021 IA HF 122) and Ohio (2021 OH SB 51).
Unemployment benefits ensure that workers can pay the bills while they search for work, while also stabilizing communities during economic downturns. During the unprecedented job losses of the COVID-19 recession, lawmakers sent unemployment benefits, billions of dollars in lifesaving aid, to families across the country. State laws and regulations vary significantly across the country, leaving many jobless workers ineligible for benefits or without enough benefits to offset lost wages, particularly in southern states with higher shares of Black residents.
Across the country, legislators worked to strengthen unemployment insurance programs during the 2021 legislative session with proposals to increase benefit adequacy, expand eligibility for benefits, and to protect workers from overpayment recovery in non-fraud cases.
State Legislators Boost Unemployment Benefits
A bill (2021 WA SB 5061) enacted by Washington lawmakers would increase the minimum weekly benefit amount in the unemployment insurance program from 15 percent to 20 percent of the state average weekly wage, and it caps the benefit amount at the individual’s weekly wage.
In Vermont, a bill (2021 VT S 10), as passed by the Senate, would establish a dependent allowance of $50 per week for claimants with one or more dependent children.
A bill (2021 AZ SB 1748/HB 2884) that failed to pass in Arizona would have increased the maximum unemployment benefit amount incrementally over three years from a fixed amount of $205 to 55 percent of the state average weekly wage for all covered workers.
Another bill (2021 AZ HB 2662) that failed to advance in Arizona would have established a dependent allowance for unemployment benefits. Individuals would have received an additional $25 per dependent, not to exceed $50 per week, in addition to their weekly benefit amount.
Florida lawmakers failed to advance a bill (2021 FL HB 207/SB 592) that would have increased the maximum weekly benefit amount from $275 to $500, in addition to increasing the minimum weekly benefit amount from $32 to $100. The bill would have increased the maximum duration for receipt of assistance to 26 weeks.
In Massachusetts, legislators are considering a bill (2021 MA S 1214/H 2033) to increase unemployment benefits for low-wage workers. The bill would ensure that more workers with low or unstable incomes would be able to access unemployment insurance by providing an alternate calculation method spread over two quarters, instead of one quarter, for workers who did not earn enough to meet the wage-based eligibility test. The bill also establishes a minimum weekly benefit amount of 20 percent of the state average weekly wage or 75 percent of the individual’s average weekly wage, and it increases the total benefit that an individual can receive during a benefit year to a larger share of their wages from 36 percent to 60 percent.
A bill (2021 NE LB 171) introduced by Nebraska lawmakers would increase a claimant’s weekly benefit amount by 5 percent for each dependent of the individual, up to a maximum increase of 15 percent.
North Carolina legislators are considering a bill (2021 NC SB 320/HB 331) that would increase the maximum weekly benefit amount from $350 to $500 and establish an annual adjustment for inflation, provided that the change is positive. The bill would adopt a more generous method for calculating weekly benefit amounts by using a worker’s wages in their highest paid quarter instead of wages paid in the last two completed quarters. Finally, the bill extends the maximum duration of benefits to 26 weeks.
Lawmakers Take Steps to Increase Access to Unemployment Benefits
Oregon lawmakers enacted a bill (2021 OR HB 3178) that eliminates an existing requirement that part-time workers may only be considered unemployed if their weekly wages are less than their weekly benefit amount.
Michigan lawmakers enacted legislation (2021 MI SB 445) that expands eligibility for federal pandemic unemployment assistance (PUA) to part-time workers. Under prior state law, part-time claimants were only eligible for benefits if they were able and available for full-time work; the bill applies to claims filed after March 1, 2020.
Legislators in Arizona failed to advance a bill (2021 AZ SB 1748/HB 2884) that would have amended the definition of “unemployed” from a weekly wage that is less than the weekly benefit amount to a weekly wage that is less than 140 percent of the weekly benefit amount. The bill would have eliminated the one-week waiting period before workers can receive and qualify for benefits. Additionally, the bill would have allowed more low-wage and part-time workers to be eligible for benefits; existing law requires workers to have been paid wages in one calendar quarter equal to at least 390 times the state minimum wage, and the bill would lower the threshold to 200 times the minimum wage.
In Florida, legislators failed to advance a bill (2021 FL HB 207/SB 592) that would have expanded access to unemployment benefits to more low-wage and nontraditional workers by establishing an “alternative base period” of the four most recently completed calendar quarters before a benefit year if they are ineligible because their wages were too low. Additionally, the wage-based eligibility requirement would have been lowered from $3,400 during a base period to $1,200. The bill would have lowered job search requirements for claimants from five contacts with prospective employers per week to three while allowing claimants to accept only part-time work of at least 20 hours per week. Finally, the bill would have required the Department of Economic Opportunity to establish two alternative methods for submitting a claim for benefits, such as telephone or email, in addition to claims via postal mail or a website.
Lawmakers in Massachusetts are considering legislation (2021 MA S 1202) to expand access to unemployment insurance for workers with fluctuating work schedules. The bill would amend the calculation for an individual’s average weekly wage to allow workers who do not meet the earnings minimum to use an alternate calculation method with a longer base period of two quarters instead of one.
Protecting Against Employee Misclassification
Iowa lawmakers are considering legislation (2021 IA HF 176) that would establish a financial penalty for employers who are found to have willfully failed to pay contributions for state unemployment insurance by misclassifying an employee’s wages equal to the amount that the employer failed to pay.
A bill (2021 MA H 2016) introduced by Massachusetts lawmakers would amend the definition of employer as it applies to unemployment insurance to clarify that employers who contract with independent contractors are responsible for making unemployment insurance contributions.
Access to Unemployment Benefits for Excluded Immigrant Workers
Colorado legislators enacted a bill (2021 CO SB 21-233) that, as introduced, would have established the Left-Behind Workers Program within the Division of Unemployment Insurance that would provide benefits to individuals who are ineligible for unemployment benefits due to their immigration status. Workers would receive benefits equivalent to 55 percent of their average weekly wage, not to exceed the maximum weekly benefit amount for unemployment benefits, for up to 13 weeks. The program was struck from the bill by committee amendments and replaced with a feasibility study before passage.
In 2022, Colorado lawmakers enacted a bill (2022 CO SB 234) to establish the Benefit Recovery Fund to provide benefits to unemployed workers who are ineligible for unemployment benefits due to their immigration status. Under the new law, a portion of existing employer premiums for unemployment insurance is diverted to the fund, and the state is required to award grants to a third-party administrator to provide benefits. Eligible workers will receive benefits amounting to 55 percent of their average weekly wage for up to 13 weeks.
A bill (2021 NE LB 298) that received first-round approval by Nebraska lawmakers would clarify that work-authorized immigrants are eligible for unemployment benefits.
Provisions of a bill (2021 NY S 4543/A 5421) to establish the Excluded Worker Fund were incorporated into the final budget (2021 S 2509/A 3009) passed by New York lawmakers. The new fund will provide cash assistance to residents of the state who have suffered a loss of earnings due to the COVID-19 pandemic and during the state of emergency but do not qualify for unemployment benefits and federal relief payments. Workers with $26,208 or less in earnings in the last 12 months and documentation of their work and earnings are eligible for a one-time payment of $14,820; all other workers without work and earnings documentation are eligible for a one-time payment of $3,040.
Washington legislators failed to advance a bill (2021 WA SB 5438) that would have established the Washington Income Replacement for Immigrant Workers Program to “provide unemployment benefits to low-income workers who are unemployed as a result of the COVID-19 pandemic and not eligible for state or federal unemployment benefits.” Workers who experienced a week of unemployment after January 1, 2021, and before June 20, 2022, due to COVID-19-related reasons would be eligible for a $400 payment for each week of unemployment.
Work-Sharing Programs
Maryland legislators enacted a bill (2021 MD SB 771/HB 1143) to expand the state’s existing work-sharing plan to include workers who are rehired after a temporary closure or layoff due to COVID-19. Under prior law, employers who reduced their workforce by 20 to 50 percent were eligible for work-sharing programs; the bill widens the range for eligibility employers who reduce their normal weekly work hours by anywhere between 10 and 60 percent.
In Tennessee, legislators enacted a bill (2021 TN SB 958/HB 1274) that establishes a voluntary shared work unemployment benefits program. Under the new law, employers can submit and receive approval from the state for a plan to reduce employee work hours in exchange for employee access to unemployment benefits. In order to receive approval, an employer’s plan must meet certain criteria, including the maintenance of health and retirement benefits for workers and a reduction of work hours by no less than 10 percent and not more than 40 percent.
Under a bill (2021 WV HB 3294) enacted by West Virginia lawmakers, employers can participate in an optional “work sharing plan.” After receiving approval for their plan from the Workforce West Virginia Commissioner, employers can avoid layoffs by reducing the hours of their workforce by no less than 10 percent and no more than 60 percent, while affected employees are eligible for short-term compensation through unemployment benefits.
Wyoming legislators enacted a bill (2021 WY HB 9) to establish the Short Time Compensation Program, which allows employers to submit a plan for approval to request the payment of short time compensation to employees to avoid layoffs. To be eligible for the program, employers must demonstrate that at least two or more employees’ hours will be reduced between 10 percent and 60 percent.
A bill (2021 HI HB 462) introduced in the Hawaii legislature would establish a work-sharing program for eligible employers. Employers whose work-sharing plans are approved can reduce between 10 and 50 percent of weekly hours of work for eligible employees in lieu of temporary layoffs that would affect at least 10 percent of eligible employees and would result in an equivalent reduction in work hours.
Indiana legislators failed to advance multiple proposals (2021 IN SB 44, 2021 IN SB 312, 2021 IN HB 1235, and 2022 IN HB 1215) that would have created a work-sharing unemployment insurance program. Under each bill, full- and part-time workers who have been continuously employed for at least 16 months prior to the work-sharing plan would have been able to receive unemployment benefits proportional to their reduction in work hours.
Good Cause for Voluntary Separation from Employment
Generally, workers are ineligible for unemployment insurance benefits if they voluntarily quit their job or refuse suitable work without “good cause.” While the definition varies by state, good cause exemptions typically protect workers who leave their jobs due to safety concerns, unfair wage or hour violations, to escape domestic violence, or discrimination by their employer. The COVID-19 pandemic spurred many lawmakers across the country to clarify statutory definitions of good cause to accommodate new caregiving needs or health and safety concerns about the work environment.
Nebraska legislators enacted a bill (2021 NE LB 260) that expands the definition of good cause for voluntarily leaving employment to include leaving a job to care for a family member with a serious health condition. Under the new law, family members include children, parents, spouses, grandparents, grandchildren, and siblings, and the definition of serious health condition is the same as defined under the federal Family and Medical Leave Act.
A bill (2021 NY A 6080/S 2623) enacted by New York legislators would amend existing law to provide that a claimant shall not be disqualified from receiving benefits for separation from employment due to “the need for the individual to provide child care to the individual’s child if such individual has made reasonable efforts to secure alternative child care.”
A bill (2021 WA SB 5061) approved by legislators in Washington provides that during a public health emergency, an individual who is at a higher risk of severe illness or death from the relevant disease, or lives with someone who is at higher risk, is eligible for unemployment benefits if they voluntarily leave employment. The bill also amends the definition of “suitable work” for the purposes of work search activities to include “the degree of risk to the health of those residing with the individual during a public health emergency.”
Arizona lawmakers introduced a bill (2021 AZ HB 2663) that failed to advance but would have provided eligibility for unemployment benefits for individuals who leave their employment or refuse an offer of employment or reemployment for reasons related to unsuitable health and safety conditions. The bill also creates good cause provisions that apply during a public health emergency, including violations of public health guidance, a need to provide care for a child or a household member, or if they leave to care for a seriously ill or quarantined family or household member.
In Kentucky, a bill (2021 KY HB 406) that failed to pass would have expanded good cause for leaving employment for the purposes of eligibility for receiving unemployment benefits to include circumstances directly resulting from domestic violence and abuse, dating violence and abuse, sexual assault, or stalking.
A bill (2021 NY S 731/A 2115) introduced by New York lawmakers would provide that a claimant shall not be disqualified from receiving unemployment benefits in cases where they have left their employment because “the employer maintained or refused or failed to cure a health or safety condition that made the environment unsuitable.”
Legislation (2021 VT H 359) that is stalled in Vermont would have expanded the definition of good cause for voluntarily leaving employment to include a change in the location of their place of work that is more than 35 miles from their residence or a location that takes more than one and a half hours to commute to; working conditions that pose a risk to their health and safety as certified by a health care provider; an unreliable work schedule; to care for a family member who is ill, injured, pregnant, or disabled; or to care for a child due to the unavailability of adequate or affordable child care.
A bill (2021 WA HB 1486/SB 5064) introduced by Washington lawmakers would expand good cause circumstances to replace “immediate family member” with “family member,” and add care for a child or vulnerable adult if caregiving is inaccessible, so long as the claimant has made reasonable efforts to a leave of absence or changes in working conditions or work schedule that would accommodate their circumstances. Additionally, the bill expands the existing good cause definition to include a change in the claimant’s usual work shifts or a relocation that makes care for a child or vulnerable adult inaccessible.
Lawmakers Protect Workers from Clawbacks in Non-Fraud Overpayment Cases
A bill (2021 OR SB 172) enacted by Oregon lawmakers would allow the state to waive clawbacks in cases where an individual received an overpayment of unemployment benefits if recovery of overpayments would be against “equity and good conscience” and if the overpayment was not due to willful misrepresentation by the recipient.
Legislators in Illinois are considering a bill (2021 IL HB 2773) that would permanently waive recovery or recoupment of unemployment benefits from individuals if their benefit year began during the state’s disaster proclamation in response to COVID-19.
In Indiana, lawmakers introduced a bill (2021 IN SB 237) that failed to advance but would have required the Department of Workforce Development to waive repayment of unemployment benefit overpayments made if they were received without fault of the individual.
A bill (2021 KY HB 240) that failed to advance in Kentucky would have allowed the Secretary of Labor to waive an overpayment of benefits upon request if it was determined that recovery would be against “equity and good conscience,” and the overpayment was due to administrative, clerical, or office error; or not the result of fraud, misrepresentation, willful nondisclosure, or the fault of the recipient.
In New Hampshire, legislators introduced a bill (2021 NH SB 161) that would prohibit the commissioner of employment security from charging interest on unemployment benefit overpayments unless an individual willfully made a false statement or knowingly failed to disclose a material fact, and from requiring repayments by any collection method unless the individual has exhausted all administrative remedies. The bill also directs the commissioner to suspend collection of non-fraud overpayments during the state of emergency, including overpayments that occurred or were established prior to the state of emergency.
New York lawmakers are considering legislation (2021 NY S 6169/A 6666) that would protect unemployment insurance claimants from being held liable for overpayments if the overpayment was not due to fraud or a willful false statement or representation, if the overpayment was received without fault on the part of the claimant, and if the recovery of such overpayment would be against “equity and good conscience.” The bill also provides notice requirements for claimants when a determination is made regarding recovery of overpayments.
In North Carolina, legislators introduced a bill (2021 NC SB 320/HB 331) that amends an existing requirement that any person who has been paid benefits to which they were not entitled shall be liable to repay the overpayment and to create an exception for cases where the error was on the part of any representative of the Division of Employment Security.
A bill (2021 VT H 97) that is stalled in Vermont would provide that “an individual shall not be liable to repay any overpayment of benefits that resulted from something other than the individual’s own act or omission.”
West Virginia legislators failed to advance a bill (2021 WV HB 2873) that would allow the Commissioner of Labor to waive repayment of overpayments of unemployment benefits for which the claimant is not at fault. The Commissioner would be authorized to waive repayment when it would be against “equity and good conscience” and cause financial hardship.
Workers who become injured or ill on the job deserve access to medical benefits and adequate compensation as they recover until they are able to return to work. Employers, especially those in low-wage or hazardous industries, should be held responsible for work-related injuries, but increasingly, the financial burden has fallen on workers. This unequal burden falls hardest on Black workers and other workers of color, who are more likely to work in high-risk industries and disproportionately punished for raising health and safety concerns with their employers. Lawmakers have the power to make state workers’ compensation systems fairer for workers and take additional measures to protect workers who file claims.
During the 2021 legislative session, state legislators took steps to rebalance workers’ compensation systems to ensure that employers assume appropriate liability for workplace injuries and unsafe working conditions. Lawmakers expanded coverage of workers’ compensation, including expanding coverage for workplace transmission of infectious diseases like COVID-19, strengthened anti-retaliation protections for workers, and ensured that workers could access necessary medical care and other benefits.
Lawmakers Consider Public Health Emergency Protections
A bill (2021 CT SB 660) enacted by Connecticut legislators would expand eligibility for workers’ compensation benefits to include post-traumatic stress injuries suffered by emergency medical services personnel, Department of Corrections employees, and emergency dispatchers; and, under circumstances related to COVID-19, health care providers.
The DC Council enacted legislation (2021 DC B24-0058) to amend the definition of injury for the purposes of workers’ compensation to include the contracting of COVID-19 in the course of and within the scope of employment. The definition is an emergency act and will remain in effect for no longer than 90 days.
Virginia legislators enacted legislation (2021 VA SB 1375/HB 2207) that establishes a presumption that COVID-19-caused deaths, health conditions, or impairment resulting in total or partial disability of a firefighter, law enforcement officer, correctional officer, or regional jail officer and are classified as occupational diseases suffered in the line of duty for the purposes of workers’ compensation. Another bill (2021 VA HB 1985) enacted by Virginia lawmakers would create a similar presumption for health care providers.
California lawmakers introduced a bill (2021 CA SB 213) that establishes a presumption of workplace transmission when hospital employees who provide direct patient care in an acute care hospital contract an infectious disease. The bill creates a broad definition of “infectious disease” that includes COVID-19.
Hawaii lawmakers are considering legislation (2021 HI SB 1415/HB 1224) that would allow receipt of workers’ compensation as an exclusive remedy by allowing workers who contract COVID-19 due to an employer’s failure to maintain adequate workplace protections against exposure to bring civil action. The bill also creates a presumption of compensability when COVID-19 “has been proximately caused by an employer’s failure to maintain adequate workplace protections against exposure to the novel coronavirus.”
A bill (2021 MD HB 765) that failed to advance in Maryland would have created the presumption of compensability as an occupational disease for public safety workers, including firefighters, police officers, and correction officers, certain health care workers, and certain child care workers who have been diagnosed with COVID-19.
Michigan lawmakers are considering legislation (2021 MI SB 161/HB 4748) that would create a presumption of personal injury for the purposes of workers’ compensation for essential workers who become injured or ill as a result of their exposure to an infectious disease during a declared emergency.
In Minnesota, lawmakers introduced a bill (2021 MN SF 105/HF 37) that would create the presumption of an occupational disease arising out of and in the course of employment in workers’ compensation cases where a school employee contracts COVID-19.
Montana legislators failed to advance a bill (2021 MT HB 550) that would have created a rebuttable presumption that an essential worker contracted COVID-19 in the workplace if the worker receives a diagnosis by a health care provider, presumptive positive test result, or a laboratory-confirmed diagnosis.
A bill (2021 TX HB 3623) that failed to advance in Texas would have provided workers’ compensation coverage for certain health care providers suffering from post-traumatic stress disorder caused by one or more events occurring in the course and scope of their employment during a public health disaster.
State Legislators Expand Workers’ Compensation Coverage
A (2021 NY S 3291/A 6077) bill enacted by legislators in New York expands eligibility for workers’ compensation to domestic workers. Domestic workers working a minimum of 20 hours a week will be eligible, up from 40 hours a week.
Another bill (2022 NY S 7843) enacted by New York legislators requires the state workers’ compensation board to provide translations of certain documents and forms. Under existing law, documents and forms used by or issued to injured employees must be published in the 10 most common non-English languages spoken by individuals with limited-English proficiency in the state; under the new law, “all board documents that provide general information to injured employees on the process of applying for workers’ compensation benefits” must be translated.
Virginia lawmakers enacted a bill (2021 VA SB 1310) to expand coverage of employment protection laws to domestic workers. As introduced, the bill ensured that more domestic workers can access workers’ compensation. The workers’ compensation provisions were removed in the enacted version of the bill, which extends wage protections and safety standards to domestic workers.
Washington legislators enacted a bill (2022 WA SB 5701) that amends the benefit calculation for claimants who are injured working while incarcerated. Under prior law, benefits for incarcerated workers are calculated based on wages paid to other employees engaged in like or similar occupations; the bill requires the benefit calculation to be based on the much-higher wages of similar workers who are not incarcerated.
In Kansas, a bill (2021 KS HB 2016) introduced would amend existing workers’ compensation law from requiring that an accident be “the prevailing factor in causing the injury” to “a substantial factor in causing the injury.”
New York legislators introduced a bill (2021 NY A 284) that would provide nail specialists a private right of action against employers who violate workers’ compensation and wage laws. The bill also creates financial penalties for health and safety violations and for unlawful retaliation against nail specialists.
States Strengthen Anti-Retaliation Protections
Lawmakers in New York are considering legislation (2021 NY S 3732/A 6775) to clarify that discrimination and retaliation by an employer against a worker who claims workers’ compensation includes the threat of reporting the citizenship status of a worker’s or a worker’s family member.
Oregon lawmakers enacted a bill (2022 OR HB 4086) to strengthen anti-retaliation protections for workers seeking workers’ compensation. Existing law prohibits retaliatory behavior by an employer—under the new law, anyone acting on behalf of an employer is also prohibited from discriminating against a worker seeking or receiving workers’ compensation. The bill also expands the definition of prohibited retaliatory actions to include actions against a worker who inquires about workers’ compensation. Finally, the bill establishes a more expansive definition of family members eligible for benefits upon the death of a worker to include a worker’s stepparents, stepsiblings, stepchildren, grandparents, grandchildren, or any spouse or domestic partner thereof.
Vermont legislators introduced a bill (2021 VT H 139) to amend existing anti-discrimination protections under workers’ compensation statutes to prohibit employers with 15 or more employees from firing an employee because of their absence from work during a period of temporary total disability.
Legislators Ensure That Workers Have a Right to Choose Their Own Doctor
A bill (2021 CO SB 21-197) that failed to advance in Colorado would have allowed injured workers to choose their treating physician from an existing list of accredited physicians through the Department of Labor and Employment. Existing law limits the selection of treating physicians to a list of designated providers as provided by the employer or by the worker’s compensation insurer.
Indiana lawmakers failed to advance a bill (2021 IN HB 1339) to allow employees to choose the physician for services required as a result of an employment injury or occupational disease for the purposes of workers’ compensation. Under current law, workers are required to receive treatment from a physician supplied by their employer.
In Montana, a bill (2021 MT HB 412) that failed would have amended workers’ compensation statutes to allow workers to choose their own treating physician. Existing law allows workers to choose the treating physician for initial treatment, but insurers may designate another treating physician or approve the worker’s chosen physician.
State legislators took steps to rein in and deter employer wage theft violations during the 2021 legislative session by strengthening state enforcement practices, increasing compensation for workers, enhancing employer penalties, and closing loopholes that allow employers to evade labor protections.
Lawmakers Strengthen State Enforcement of Wage Theft Violations
Colorado lawmakers passed legislation (2022 CO SB 161) to increase employer penalties for wage theft and redefining wage theft as criminal theft. Additionally, the bill creates a private right of action for employees who have experienced discrimination or retaliation by an employer for filing a wage complaint or testifying or providing evidence in a wage theft proceeding. Such employees are eligible for back pay, reinstatement, interest on unpaid wages, penalties, and inductive relief. Finally, the bill creates new protections against worker misclassification by establishing the Worker and Employee Protection Unit under the direction of the attorney general, which is responsible for investigating worker misclassification.
A bill (2021 MA S 1179/H 1959) introduced by Massachusetts lawmakers would authorize the state attorney general to file a civil action for injunctive relief, damages, and lost wages and benefits on behalf of an employee or group of employees. Where such cases prevail, employees are entitled to treble (or triple) damages and the state shall be awarded the costs of litigation and reasonable attorneys’ fees. The bill also authorizes the attorney general to issue a stop work order against a person or entity found to be in violation of certain wage laws. The bill also creates whistleblower and anti-retaliation protections for workers involved in wage theft claims by creating a rebuttable presumption of a violation of law where an employer discriminates or takes adverse action against a worker within 90 days of their exercise of rights under the law.
New York lawmakers are considering the “Empowering People in Rights Enforcement (EMPIRE) Worker Protection Act” (2021 NY S 12/A 5876), which would allow workers to initiate a public enforcement action on behalf of the state for violations of labor laws and regulation, including wage theft. Under the bill, workers would also be able to authorize a labor union or nonprofit organization to initiate a public enforcement action on their behalf. The bill designates that a portion of civil penalties recovered, depending on whether the state was an intervener in the case, be remitted to the Department of Labor for future enforcement actions.
Introduced legislation in New York (2021 NY AB 8092), which passed out of both chambers in 2022, would add the use of “any legally protected absence” to the reasons that an employer cannot retaliate against an employee, and would include deducting allotted leave time as a potential prohibited employer method “to threaten, penalize, or in any other manner discriminate or retaliate” against an employee.
Another bill (2021 NY A 1893) proposed by New York legislators would require that cities with a population of one million or more residents shall reject bids for contracts where the bidder “has had any safety, wage theft, or other violations involving the mistreatment of employees or contractors,” among other new considerations regarding the bidder’s history of compliance with the law or project performance.
In Texas, legislators failed to advance a bill (2021 TX SB 1834/HB 190) that would have established a publicly accessible wage theft database of employers that have been assessed a penalty, ordered to pay a wage claim, or convicted of a wage penalty offense. Employers would remain on the database for three years after their assessment or conviction.
Lawmakers Improve Recovery of Lost Wages, Damages, and Legal Costs
In Arkansas, legislators introduced but failed to advance the “Right to Know and Get Your Pay Act” (2021 AR SB 600), which would have entitled workers to damages in the amount of twice their wages due. The bill also would have established an employee’s right to file civil action against an employer who fails to comply with the new law. Workers who prevail in such cases are entitled to unpaid wages, an additional 25 percent of unpaid wages as damages, reasonable attorneys’ fees and litigation costs; in cases that are found to be an intentional violation, workers are entitled to double damages. Finally, the bill would have provided new anti-retaliation protections for workers who engage in wage theft enforcement actions, and employers who are found to have retaliated are subject to civil action and a penalty of $5,000.
Lawmakers in Illinois passed legislation (2021 IL SB 2476/HB 118) to increase the amount of damages that workers can recover in cases of wage theft. Under current law, workers are entitled to the amount of underpayments, in addition to damages of 2 percent of underpayments for each month following the date of payment during which such underpayments remain unpaid; the bill would increase damages to 5 percent of lost wages.
A bill (2021 NY S 2762/A 766) introduced in New York would ensure that workers can recover wage claims ordered in court judgments or administrative decisions when an employer transfers or hides assets. The bill creates an employee’s lien, where wage claims can be resolved against an employer’s interest in property.
North Carolina legislators are considering a bill (2021 NC SB 446) that would increase the amount of damages that an aggrieved worker is entitled to in recovering unpaid wages. Existing law provides damages equal to the amount unpaid in addition to 8 percent interest; the bill would increase damages to twice the amount unpaid, plus interest. The bill also authorizes courts to award statutory damages of up to $500 per employee per violation in cases where an intentional violation of wage theft is found, in addition to requiring legal fees to be paid by the defendant. Finally, the bill allows for recovery of unpaid wages to be enforced through a lien on property of the employer or property upon which the employee has performed work.
State Legislators Enhance Employer Penalties for Wage Theft Violations
Lawmakers in California approved legislation (2021 CA AB 1003) that would create a new crime of grand theft for the intentional theft of wages, including benefits or other compensation, in an amount greater than $950, in aggregate, by an employer. As amended, the bill includes theft of gratuities and includes independent contractors within the definition of employee.
Enacted legislation in Oregon (2022 OR HB 4002) provides a “carrot and stick” approach to overtime compensation for agricultural workers. This new law phases in a 40-hour regular workweek for agricultural workers and provides for a civil penalty for any employer violations and also creates a tax credit to employers for a percentage of overtime compensation paid due to this new law.
In Kentucky, lawmakers failed to advance a bill (2021 KY HB 63) that would have created a new Class A misdemeanor for employer theft of wages in cases where the value of unpaid wages was less than $500. Under the bill, wage theft of $500 or more but less than $10,000 would be a Class D felony, and cases of wage theft of $10,000 would be a Class C felony.
A bill (2021 NY S 4009/A 2022) that has passed the Senate in New York would amend the definition of property relating to the existing crime of larceny to include wage theft.
North Carolina lawmakers are considering a bill (2021 NC SB 446) that would establish civil penalties for employers who violate minimum wage, overtime, wage payment, and employee wage notification laws. Under the bill, the maximum penalty would be $500 for the first violation and $1,000 for each subsequent violation.
In Rhode Island, legislators failed to advance a bill (2021 RI S 195/H 5870) that would have strengthened penalties for wage theft and employee misclassification. The bill would have created a new felony for misclassification and wage theft, punishable by up to three years in prison and a fine of up to $10,000 for the first offense of lost wages of $1,500 to $5,000, or up to five years in prison and a fine of three times the wage amount or $20,000, whichever is greater, for subsequent violations in excess of $5,000.
Legislators Close Employer Liability Loopholes
Georgia legislation (2021 GA HB 389), which passed in 2022, provides the following test for subcontractor misclassification by clarifying that someone who is NOT an employee: “(i) Is not prohibited from working for other companies or holding other employment contemporaneously; (ii) Is free to accept or reject work assignments without consequence; (iii) Is not prescribed minimum hours to work or, in the case of sales, does not have a minimum number of orders to be obtained; (iv) Has the discretion to set his or her own work schedule; (v) Receives only minimal instructions and no direct oversight or supervision regarding the services to be performed, such as the location where the services are to be performed and any requested deadlines; (vi) When applicable, has no territorial or geographic restrictions; and (vii) Is not required to perform, behave, or act or, alternatively, is compelled to perform, behave, or act in a manner related to the performance of services for wages.”
Lawmakers in New York enacted a bill (2021 NY S 2766/A 3350) targeting the evasion of wage theft enforcement by construction subcontractors. The bill would clarify that the general or prime contractor of a construction project assumes liability for unpaid wages, benefits, damages, and attorneys’ fees resulting from civil or administrative actions for wage theft claims against its subcontractors. Additionally, the bill authorizes contractors to withhold payments to subcontractors for failure to comply with wage theft prevention measures, including the provision of payroll records.
In Massachusetts, a bill (2021 MA S 1179/H 1959) under consideration would subject lead contractors to joint and several civil liability (in cases where multiple parties are at fault, each party is independently liable for the full amount of damages) for wage theft violations of any contractor or subcontractor that performs labor or services “that has a significant nexus with the lead contractor’s business activities, operations or purposes.” Under the bill, lead contractors who receive notice of wage theft violations against a person performing labor for them through a contractor or subcontractor may provide the unpaid wages directly to the person or withhold payments to the contractor or subcontractor in the amount of unpaid wages.
This primer is part of a series on anti-racist state budgets. To understand the concept of creating anti-racist state budgets, it is important to understand the difference between racist and anti-racist ideas and policies. The following excerpts are from How to Be an Antiracist (2019) by Ibram X. Kendi:
Racist vs. Anti-racist Ideas
A racist idea is any idea that suggests one racial group is inferior or superior to another racial group in any way. Racist ideas argue that the inferiorities and superiorities of racial groups explain racial inequities in society. . . . An antiracist idea is any idea that suggests the racial groups are equals in all their apparent differences – that there is nothing right or wrong with any racial group. Antiracist ideas argue that racist policies are the cause of racial inequities.
Racist vs. Anti-racist Policies
A racist policy is any measure that produces or sustains racial inequity between racial groups. An antiracist policy is any measure that produces or sustains racial equity between racial groups. . . . There is no such thing as a nonracist or race-neutral policy. Every policy in every institution in every community in every nation is producing or sustaining either racial inequity or equity between racial groups.
For additional race-equity concepts and definitions, please visit the Racial Equity Tools glossary.
The following primer examines how policymakers have impacted low-income communities and communities of color through racist transportation policies and practices and, drawing from existing research, analyzes how state budgets can guide racial equity outcomes. It also outlines progressive considerations for state legislators to take into account when crafting related anti-racist legislation. We hope that a better understanding of the effects of state budgets on transportation equity will support progressive legislative efforts to create transportation systems that promote public health, sustainability, and equitable opportunity.
History of Racist Transportation Policies
Sculpture of Rosa Parks at the National Civil Rights Museum in Memphis, Tennessee. (Photo: Gino Santa Maria / Shutterstock)
Our ability to access affordable and reliable transportation is a basic right that many communities have been deprived of as a result of inequitable transportation investments. Low-income communities and communities of color bear the largest burden of our states’ transportation decisions.
Race and transportation have long been intertwined. In 1955, Rosa Parks became the icon of the Montgomery Bus Boycott by refusing to give up her bus seat to a white rider. Her arrest led Montgomery’s Black community to launch a massive boycott, demanding better treatment for Black riders and equitable access to public transit. In the early 1960s, Freedom Riders challenged segregation laws and asserted their rights to ride interstate transportation.
Although the civil rights movement helped increase the accessibility of transportation, the issue of inequity has persisted. Discriminatory practices, such as redlining, have locked communities of color out of certain neighborhoods and left them without many transportation options. Redlining was followed by other detrimental efforts, such asurban renewal—a nationwide program established by the Housing Act of 1949—that provided federal grants to cities for the purposes of rebuilding their downtowns.
Urban renewal allowed cities to raze and rebuild entire areas, clear slums and blighted properties, and develop highways. This program led to the widespread development outside city centers, also known as urban sprawl. Investments in these developments have changed the urban geographical landscape and displaced communities, disproportionately impacting low-income people and people of color. Similar racist policies and practices persisted after the 1960s and continue today, leading to increased traffic congestion and air pollution, ongoing negative health effects (e.g., respiratory illnesses, lung cancer, and impaired lung development), evictions of marginalized groups, dangerous road conditions for biking and walking, and the destruction of thriving neighborhoods.
Current departments of transportation and transit agencies are still operating systems grounded in racism and guided by the inequitable policies of the civil rights era. Not only do current highway projects continuously displace Black and Brown communities across the country, but also transit agencies have designed their routes and systems around the stereotype that there are only two kinds of riders: “captive” and “choice” riders, with this binary design disproportionately disadvantaging marginalized communities.
Choice Riders vs. Captive Riders
“Choice” riders—who are mostly affluent individuals with cars—are not transit dependent but often want fast, reliable, comfortable transportation with great service. “Captive” riders—who are mostly low-income people without cars—are those who rely on transportation services even if they are unhappy with the service. Categorizing transit this way has led policymakers to prioritize transit projects that place greater burden on communities of color.
In some cities, transit agencies have isolated commuter buses and local buses that reach the same destination by creating vastly different bus routes based on the socioeconomic demographics of the neighborhoods. Oftentimes, such separation of transit networks creates more barriers for low-income, mostly Black “captive” riders who cannot afford the higher-quality bus service and must travel longer to get to their destinations. Agencies have also relied on the police to patrol trains and enforce fares, resulting in increased enforcement that disproportionately impacts people of color and criminalizes poverty.
Development of Highways & Displacement of Communities
In 2018, state and local governments collectively spent about $70 billion on public transportation. At the same time, these governments devoted over $232 billion to highways. Greater investment in highways is one of many examples of how transportation policy priorities have led to an underinvestment in sustainable infrastructure within marginalized communities.
Many highway construction projects have also displaced communities by creating changes in the land value of a neighborhood and destroying the units occupied by low-income households and households of color. These projects contribute to a loss of affordable housing and the disintegration of communities, significantly affecting the quality of the neighborhood and its residents. Similar to the ways urban renewal programs destroyed the homes of marginalized communities to resolve urban blight, the prioritization of highway expansion over public transportation projects has inequitable and disproportionate effects on low-income and minority residential neighborhoods.
Accessibility of Public Transit
Financial Accessibility
Since 1995, public transit ridership has increased by 28%. Contributing to this ridership increase, income and wealth disparities have led many people of color to have relatively less access to cars. As a result, people of color are the ones most likely to rely on public transportation as their main form of travel. Especially in urban areas, Black, Latinx, and Asian people take public transit more often than their white counterparts to access public services and get to work and school. However, the restriction of public funds for transit, along with governments’ prioritization of highways, has shifted resources away from alternative transportation options. If and when municipalities rely on fare increases to manage their budget crises, these increases hurt transit-reliant communities and decrease the financial accessibility of buses. Cities and states can mitigate these issues if they make targeted investments in public transit. One study in Boston found that a 50% reduction in transit-pass costs for low-income riders resulted in about 30% more trips and an increase in trips to health care and social services.
Physical Accessibility
Forty-five percent of Americans have no access to public transportation. Some areas, especially sprawling cities, do not support public transportation due to certain land patterns and the separation of homes from places of work and services, creating longer travel distances and a greater dependence on automobiles. Residents in these areas are then forced to rely on cars, which is an expense many cannot afford, leaving them with few good transportation options and compounding the cycle of poverty. Low-income people of color are already less likely to own a car and their lack of car ownership combined with inadequate and inaccessible public transit further exacerbates their circumstances. Even when people are presumed to have access to transit, these individuals often have to navigate dangerous roadways in order to do so. For more information on the impacts of dangerous road infrastructure, see the section below on Road Safety for Civilians.
Note on Ableism
In addition to people of color, the disabled community has historically been excluded from public transportation. Thirty years after the passage of the Americans with Disabilities Act (ADA), transportation choices for people with disabilities are still limited. From transit stop and station designs that assume passengers will be able-bodied (e.g., lack of shade or stairs to platforms) to lack of compliance with ADA requirements for announced bus stops, there are many important issues to address when improving the accessibility of bus services for all. Lack of transit-oriented development—“walkable, compact, mixed-use, higher-density development within walking distance of a transit facility”—places a burden on those who cannot drive due to a physical disability, visual impairment, or other reasons.
Privatization Risk
Many cities and transit agencies are partnering with ride-hailing companies, such as Uber and Lyft, to make transportation more affordable and connect more riders to transit hubs through a mobile application that could connect users to cars, bikes, scooters, buses, and trains. Some agencies have already replaced routes with low ridership with credits for Uber and Lyft. While such partnerships will help invite more riders to use these ride-hailing applications, these agreements with Uber and Lyft have many technological, financial, and cultural implications for non-native English speakers and people without access to banks, smartphones, and data plans.
Road Safety for Civilians
Walking, bicycling, and public transit need to be not only accessible to but also safe for everyone. Motor vehicle crash data comparing 2010 to 2019 shows that in urban areas, pedestrian fatalities increased by 62% and bicyclist fatalities increased by 49%, and the proportion of total traffic fatalities that were non-occupant (e.g., bicyclists and pedestrians) fatalities jumped from 15% in 2010 to 20% in 2019. Similar to how states are not investing in public transit, states are also allocating only a small portion of their budgets to improve pedestrian infrastructure. People of color and low-income people often use active transportation to get from one place to another, with Hispanic, African American, and Asian American populations experiencing the fastest growth in bicycling. Yet the street conditions are often more dangerous for these individuals in comparison to the walking and bicycling conditions of their white, middle-class counterparts.
People of color are already twice as likely to be killed while walking than other groups. Not only do high-speed, multi-lane avenues and poorly designed streets contribute to traffic-related deaths, but they also affect the abilities of communities, especially those composed of low-income individuals and people of color, to be physically active. These conditions have the potential to shorten lives and impair people’s ability to thrive.
Environmental Effects on Public Health
The transportation sector emits more than half of the nitrogen oxides in our air and accounts for about 28% of total U.S. greenhouse gas emissions. Urban and metropolitan areas with traffic congestion typically experience the most significant pollution, which is often traced to inefficient land use patterns, sprawling development, and policies that favor highway development over transit. Long-term exposure to pollutants can lead to lung cancer, heart disease, respiratory illnesses, and impaired lung development and function in children and infants. These issues are further compounded when unsustainable transportation projects invade communities where poor air and water quality is already an issue. Oftentimes, it is low-income neighborhoods and communities of color who face greater environmental and health consequences from the underinvestment in sustainable transportation infrastructure.
Traffic Enforcement and the Role of Police
Instead of investing in equitable transportation projects, 25 states have used portions of their state highway fund dollars to finance highway patrols as of 2017. Dedicating highway fund dollars for state police not only takes away funding for more equitable transit, but also severely affects people’s ability to benefit from the transportation system. Transportation inequities take place in low-income communities and communities of color, which are often over-policed and under-protected in comparison to higher-income, majority-white neighborhoods.
State and local law enforcement compound such inequities by using traffic laws and minor violations as a pretext for stopping and searching drivers, especially people of color. Coupled with racial bias, these stops often escalate and lead to unnecessary use of force or arrests that disproportionately impact Black people and communities of color. In addition, disparate targeting of fare evasion enforcement on transit systems has led to increased police-civilian interaction for harmless infractions and the criminalization of poverty in Black and Brown neighborhoods.
Incorporate inclusive community engagement practices into transportation planning and decision-making processes. Low-income communities and communities of color bear most of the burden of unsustainable transportation outcomes yet have been historically excluded from the decision-making process. Communities should have the power to decide which transportation projects best meet their needs. Thus, state legislators and departments of transportation should sustain avenues for increased public involvement in transportation planning so communities can directly influence transportation priorities, choices, and budget allocations.
Develop a mechanism for prioritizing and evaluating transportation projects based on sustainability, accessibility, and community priorities. Car-centric transportation planning often result in policies that physically, economically, and environmentally harm low-income communities and communities of color. To better serve those most impacted by transportation projects, state legislators should create a prioritization process that integrates equity principles and considers community needs.
Example of prioritizing equity and community needs
Virginia’s legislature unanimously passed 2014 VA HB 2 (Chapter 726), which directed the Commonwealth Transportation Board (CTB) to develop and use a prioritization process to select transportation projects and ensure the best use of limited tax dollars. The bill led the CTB to develop SMART SCALE, a data-driven system that scores projects based on an objective, outcome-based process that is transparent to the public. Factor areas include safety, congestion mitigation, environmental quality, economic development, land use, and accessibility. “Accessibility” considers projects that will ensure access to jobs for disadvantaged groups. The results from the screening process are presented to the public, and the CTB takes public comments into account when selecting transportation projects.
Increase funding for public transportation to provide and maintain quality and affordable transit facilities and services, especially for transit-dependent communities. Currently, many states rely on outdated technology, tools, and policies to inform their decisions on which transportation projects to prioritize and fund. For example, some states prioritize highway projects because they have constitutional prohibitions that limit the use of gas tax revenues to highways only. To ensure equitable investments in public transportation, state legislators should reallocate funding toward sustainable modes of infrastructure by modernizing the policies and systems of their departments of transportation.
Infrastructure Funding
When seeking out revenue sources for public transportation, state legislators need to also evaluate the potential implications of these sources for marginalized communities. The funding source, mechanism, and revenue distribution must all center equity. States’ most important source of transportation funding is state gas taxes. There are many states that have waited a decade or longer to increase their gas tax rates. In addition, some states’ taxes have not been adjusted to keep pace with rising transportation construction costs, negatively affecting funding of economically vital infrastructure projects. When boosting funding for public transportation through gas tax reform or other types of taxes (e.g., vehicle miles traveled tax and congestion pricing), state lawmakers must also reduce regressivity and protect low-income communities from bearing the largest financial burden.
Examples and resources of revenue options
Example: Passed in 1935, Colorado’s constitutional amendment required gas tax revenues and vehicle registration fees to be spent on highways and bridges. However, the state had an unclear definition of “highways,” largely excluding local roads, sidewalks, bike infrastructure, and transit. In 2013, a coalition of transit advocates helped push for 2013 CO SB 48 (Chapter 138) (CO Stat. §§43.4.205,43.4.207,43.4.208), which expanded the interpretation of “highways” and allowed for the entire local share of the Highway Users Trust Fund (derived from state gas tax and registration fees) to be used for public transit and bicycle or pedestrian investments.
Example: In 2007, Minnesota legislators passed a transportation funding bill (2007 MN HF 2800) that included a gas tax increase. To offset the impacts of the increase on low-income communities, the bill also created a lower-income motor fuels tax credit equal to $25 to assist those in the lowest income bracket. However, three years later, the legislature repealed this tax credit through 2010 MN HF 2695 [Section 62(a)].
Resource: The National Conference of State Legislatures has outlined 2013-2020 legislative actions on changing and reforming state gas taxes.
Resource: This resource from American Council for an Energy-Efficient Economy covers state legislation that identifies specific sources of funding for public transit and other alternatives to highway modes of transportation.
Resource: The Greenlining Institute’s Greenlined Economy Guidebook focuses on six standards for equitable community investment: 1) emphasize race-conscious solutions, 2) prioritize multisector approaches, 3) deliver intentional benefits, 4) build community capacity, 5) be community driven at every stage, and 6) establish paths to wealth building. These standards can help legislators make equitable community-based decisions on transportation projects.
Address our crumbling roadway infrastructure by reallocating funds from highway construction projects to maintenance and infrastructure that benefit disadvantaged communities. Federal law provides states with the flexibility to spend funds they receive from highway formulas. However, such flexibility grants the states the ability to focus on expanding highways instead of fixing crumbling roads first. While it is critical to put pressure on Congress to prioritize highway formula dollars for maintenance, states can also take immediate action by ensuring their statewide transportation packages emphasize repairing potholes, unfixed highways, and crumbling roads over expansion projects. State legislators should also devote a percentage of their transportation funds to low-income or high-need communities.
In addition, policymakers should consider implementing life cycle cost analysis (LCCA) programs. Such programs enable transportation planners to examine the total costs of a project over its expected life and compare differing life-cycle costs between alternative options. As a result, LCCAs help identify the most beneficial and cost-effective projects and require decision-makers to think more about maintenance over expansion.
Examples of reallocating funds and LCCAs
Example: In 2013, California enacted 2013 CA SB 99 (Chapter 359), which created an Active Transportation Program (ATP). Although the law expressly requires that 25% of funds must benefit disadvantaged communities, the program has seen more than 85% of funds devoted to projects that support high-need neighborhoods. Since its inception, ATP has funded over 800 active transportation projects in both urban and rural areas across the state. Through 2017 CA SB 1 (Chapter 5), California later allocated an additional $100 million per year in funding to ATP.
Example: In 2008, Minnesota enacted 2008 MN HF 3486 / Section 71 (Chapter 287) (MN Stat. § 174.185), which requires an LCCA for every project in the reconditioning, resurfacing, and road repair funding categories. Documentation required includes the lowest life-cycle cost, any alternatives considered, as well as a justification for the chosen strategy if it does not include the lowest life-cycle cost option.
Support transit-oriented development and smart growth initiatives that promote community economic development and incorporate equity principles. Transit-oriented development promotes alternative modes of sustainable transportation and increases access to affordable housing, jobs, and schools for low- and moderate-income families. State legislatures should:
create incentives for integrated transportation planning and land use that enables all people to experience the benefits of pedestrian-oriented development near transit hubs;
address land-use concerns that inhibit transit-oriented development and allow cities to take meaningful action in their municipalities; and
use racial equity outcomes to guide the planning process and ensure that such development does not displace and evict long-term and low-income residents.
Example and resources for transit-oriented development
Example: Delaware passed a bill (2016 DE SB 130) allowing the state department of transportation to enter into an agreement with local governments to create transit-oriented development districts, or “Complete Community Enterprise Districts,” allowing municipalities and agencies to collaborate and create stronger active transportation infrastructure to improve access to transit.
Resources:
Reconnecting America released a report of state, regional, and local programs that fund transit-oriented development plans and projects.
PolicyLink posted a report on advancing equitable transit-oriented development through community partnerships and public sector leadership.
Enterprise, the National Housing Trust, and Reconnecting America present case studies that focus on ways to preserve affordable housing near transit.
The National Conference of State Legislatures has a resource on transit-oriented development in the states.
6. Call on municipalities to adopt and implement Complete Streets policies in low-income, high-need communities. Designing transit-friendly streets and safe roadways for all users will make walking and biking safer and more convenient for pedestrians and cyclists. Complete Streets policies promote infrastructure that reduces reliance on cars, resulting in increased engagement in physical activity and a reduction in greenhouse gas emissions. State legislators should encourage the implementation of this policy in high-need communities that have more dangerous street conditions.
Example and resource for Complete Streets policies
Example: The Massachusetts Department of Transportation’s Complete Streets Funding program was created by legislative authorization through a Transportation Bond Bill (2014 MA HB 4046 / Section 9 (Chapter 79)). The program provides technical assistance and construction funding to eligible municipalities that demonstrate a commitment to embedding Complete Streets in policy and practice.
Resource: The National Association for City Transportation Officials has an Urban Street Design Guide that serves as a blueprint for designing 21st century streets and that charts the principles and practices for making streets safer and more livable in the United States.
7. Redirect funds and responsibilities away from state police and toward investments in communities. Legacies of discrimination and racism pervade our transportation system and policies. Not only do communities of color have a lack of access to mobility options, but they also suffer disproportionately from police-involved violence initiated by traffic stops. In order to achieve transportation equity and ensure safe streets for all populations, states must address both policies that disadvantage biking and walking and the ongoing racist police enforcement of traffic laws that lead to disproportionate harms for Black and Brown drivers.
Examples of alternatives to policing
Example: In 2019, the New York legislature passed 2019 NY AB 6449 (Chapter 30), which granted New York City’s Department of Transportation the authority to expand and enhance its school-based speed camera program from 140 locations to 750. When installation is completed, the city will have the largest automated enforcement program in the United States.
Example: In 2020, Berkeley, California, passed a first-in-the-nation plan to create a newly formed Department of Transportation to replace police officers with a group of unarmed employees who will enforce traffic laws. The city is also establishing a community engagement process to develop a new model for policing in Berkeley.
Reimagining Public Safety: Resources for State Action
Introduction
When a jury found Derek Chauvin guilty on all charges in the murder of George Floyd, accountability was, at last, applied to a police officer. But we must not let this single trial lessen the urgency of demands for changes to the violent system of policing in this country. Accountability does not equate to justice. Justice would be George Floyd alive today, living in a world that knows the Black lives matter. Justice would be an end to the constant, unrelenting police violence that takes the lives of nearly 1,000 Americans each year and terrorizes the lives of thousands more.
Accountability does not equate to justice. Justice would be George Floyd alive today, living in a world that knows the Black lives matter.
Incremental policy changes haven’t stopped the killings and one guilty verdict will not, either. We need to reimagine public safety in America. Each murder of yet another Black person by the police shows we need to transform our approach to public safety. In the words of the Movement for Black Lives, “There is no ‘reforming’ this system—the time is now to divest from deadly policing and invest in a vision of public safety that protects us all.”
SiX compiled the resources below following the guilty verdict in the trial of Officer Derek Chauvin, who killed George Floyd in May 2020. Read our full statement here.
The police don’t keep everyone safe. We need a new approach to public safety that truly protects everyone from harm. Since the murder of George Floyd, 30 states have passed more than 140 new laws related to public safety, but we know from the continued murders and violence inflicted on Black and brown people that this is not enough.
As you consider the introduction of public safety legislation, we encourage you to reach out to your legislative peers in these states who have sponsored this legislation. These leaders carry a depth of knowledge about the policy, and can also talk to you about their strategies, the obstacles, what didn’t make it into the legislation (and why), and what they’re working on next (SiX can help connect you). We need to learn lessons from state to state, rather than copying and pasting a one-size-fits all approach, so we can collectively accelerate our work toward justice where all people feel safe in their communities.
“The only way to diminish police violence is to reduce contact between the public and the police.” — Mariame Kamba
Changes to oversight, accountability, training, and police policies are essential for harm reduction, but to truly transform public safety into a system that works for all, alternatives to policing must be pursued. For starters, mental health, traffic, gender-based violence, and crime investigation services could be better fulfilled by other trained, unarmed, and nonviolent professionals. The list of legislation below is not comprehensive.
Structural Reforms
Activists and communities have been calling for fundamental changes to policing for many years. The more recent “Defund the Police” campaigns envision a new system that goes beyond incremental police reforms. As The Opportunity Agenda puts it in Beyond Policing:
What would it look like to have first responders who were unarmed mental health specialists work with those experiencing a crisis in public? How would it be different for those experiencing homelessness if they had an ongoing relationship with a trained social worker instead of periodic encounters with police?
While we are unaware of any state to make fundamental changes to the notion of policing in America, the Beyond Policing report highlights local examples of restorative justice, peacemaking circles, mobile crisis centers, youth and community courts, stipends and other supports for individuals at-risk of perpetrating violence.
The following legislative examples are small steps that states have taken to move away from a model of policing and punishment to one that provides true safety for all members of the community, including alternatives to policing, a halt on automatic police department funding supports, and de-militarization of police departments.
Alternatives to Policing
Enacted legislation in Connecticut (2020 CT HB 6004) requires the Connecticut Department of Emergency Services and Public Protection and local police departments to evaluate the feasibility and potential impact of using social workers to respond to calls for assistance or accompany a police officer on certain calls for assistance.
Colorado enacted legislation (2020 CO HB 1393) expanding the state’s Mental Health Diversion Pilot Programs from four to five or more in selected judicial districts that identifies individuals with mental health conditions who have been charged with a low-level criminal offense and divert such individuals out of the criminal justice system and into community treatment programs.
Police Department Budgets
Colorado legislation (2020 CO HB 1375) repealed the State Division of Criminal Justice's authority to spend unused appropriations for the Law Enforcement Assistance Grant Program in the following year. Local law enforcement agencies, which include county and municipal agencies and district attorneys, therefore have access to less grant funding in FY 2020-21, and potentially in future years.
De-Militarization of Police
California (2020 CA SB 480) enacted legislation prohibiting a law enforcement agency from authorizing or allowing its employees to wear a uniform that is made from a camouflage printed or patterned material or a uniform that is substantially similar to a uniform of the United States Armed Forces or state active militia.
Comprehensive policing reform legislation in Connecticut (2020 CT HB 6004) prohibits law enforcement agencies from acquiring certain “1033 program” military equipment; requires police departments to submit an inventory report to the legislature; and it allows the executive branch to require law enforcement agencies to sell, transfer, or dispose of equipment found to be unnecessary for public protection.
The D.C. Council enacted a bill (2020 DC B23-0825) to prohibit District law enforcement agencies from acquiring “ammunition of .50 caliber or higher; armed or armored craft or vehicles; bayonets; explosives or pyrotechnics, including grenades; firearm mufflers or silences; firearms of .50 caliber or higher; firearms, firearm accessories, or other objects, designed or capable of launching explosives or pyrotechnics, including grenade launchers; and remotely piloted, powered aircraft without a crew aboard, including drones” from any federal government program. Under the new law, District agencies are also required to relinquish any such property within 180 days after the effective date of the law.
A bill (2021 IL HB 3653) passed by Illinois lawmakers prohibits the State Police from requesting or receiving tracked armored vehicles; weaponized aircraft, vessels, or vehicles; firearms of .50 caliber or higher; ammunition of .50 caliber or higher; grenade launchers; or bayonets. Virginia lawmakers enacted legislation (2020 VA SB 5030) to prohibit the acquisition of certain weapons and equipment from the Department of Defense, including weaponized unmanned aerial vehicles, combat aircraft, surplus grenades and grenade launchers, surplus armored vehicles, bayonets, firearms of .50 caliber or higher, ammunition of .50 caliber or higher, and weaponized tracked armored vehicles.
Limiting Police Engagement
A demonstrator and celebrant of Juneteenth holds a sign that reads "I am my ancestors wildest dream" at Black Lives Matter Plaza.
Police involved violence disproportionately impacts Black and brown communities. Mapping Police Violence provides powerful data showing that:
Black people were 28% of those killed by police in 2020 despite being only 13% of the population.
Black people are 3 times more likely to be killed by the police than white people, and 1.3 times more likely to be unarmed when killed by the police.
Most killings by police begin with traffic stops, mental health checks, domestic disturbances, or reported low level offenses.
To reduce violence during police interactions, states have enacted legislation to reduce over policing, regulate the use of “no-knock” search warrants, limit the use of deadly force, ban chokeholds, require police officers to intervene to stop excessive use of force or to render medical aid, and train police officers in topics from de-escalation to implicit bias.
Use of Force and Chokehold Bans
Legislation enacted in California (2019 CA AB 392) specifies that a police officer is only justified in using deadly force to defend against an imminent threat of death or serious bodily injury to the officer or to another person or to apprehend a fleeing person who the officer reasonably believes will cause death or serious bodily injury to another person unless immediately apprehended. The law prohibits a police officer from using deadly force against someone who only poses a danger to themselves.
California legislation (2019 CA AB 1196) prohibits a law enforcement agency from authorizing the use of a carotid restraint hold or a choke hold. The California law defines “carotid restraint” as a vascular neck restraint or any similar restraint, hold, or other defensive tactic in which pressure is applied to the sides of a person's neck that involves a substantial risk of restricting blood flow and may render the person unconscious in order to subdue or control the person. And “choke hold” is defined as any defensive tactic or force option in which direct pressure is applied to a person's trachea or windpipe.
A comprehensive police reform bill enacted in Colorado (2020 CO SB 217) creates a new use of force standard by limiting the use of physical force and limiting the use of deadly force when force is authorized. The act prohibits a peace officer from using a chokehold.
Enacted legislation in Connecticut (2020 CT HB 6004) limits the circumstances under which a law enforcement officer’s use of deadly physical force is justified and establishes factors to consider when evaluating whether the actions were reasonable. The law also limits an officer’s use of a chokehold or similar restraints.
Delaware state legislators enacted 2020 DE HB 350 which creates a new felony charge called “aggravated strangulation.” This charge is reserved for acting law enforcement officers who knowingly or intentionally use a chokehold on a person. This law creates an exception for officers who deem the use of force necessary to save the life of another law enforcement officer. The law does not limit the state from pursuing further charges to the officer beyond the aggravated strangulation charge.
The D.C. Council enacted a comprehensive package of policing reforms (2020 DC B23-0825) that included a ban on the use of neck restraints by law enforcement officers as a form of lethal and excessive force. The legislation also established new requirements for the “reasonable” use of force, which includes a consideration of the use of de-escalation measures and “whether any conduct by the officer prior to the use of deadly force increased the risk of a confrontation resulting in deadly force being used.”
Illinois recently enacted criminal justice reform legislation (2021 IL HB 3653) that includes statewide standards on use of force, crowd control responses, de-escalation, and arrest techniques. It also broadens the prohibition on using a chokehold to also include any restraint above the shoulders with risk of asphyxiation, unless the use of deadly force is justified.
Police reform legislation in Indiana (2021 IN HB 1006) defines “chokehold” as a use of deadly force and prohibits the use of a chokehold under certain circumstances.
Legislation enacted in Iowa (2020 IA HF 2647) states that the use of a chokehold is only justified when the person being arrested has used or threatened to use deadly force in committing a felony, or when the police officer reasonably believes the person would use deadly force against any person unless immediately apprehended. The new law defines “chokehold” as the intentional and prolonged application of force to the throat or windpipe that prevents or hinders breathing or reduces the intake of air.
Recently enacted legislation in Maryland (2021 MD SB 71) that requires a police officer to take steps to de-escalate conflict without using physical force, and prohibits a police officer from using force that is not necessary and proportional to prevent imminent physical injury or to effectuate a legitimate law enforcement objective. The law specifies that this use of force must cease after the suspect is under the police officer’s control, no longer poses an imminent threat, or after it is determined that force will no longer accomplish a legitimate law enforcement objective.
Legislation in Massachusetts (2020 MA SB 2963) identifies the general circumstances under which police officers can use physical force, and specifically bans the use of chokeholds and prohibits firing into a fleeing vehicle unless doing so is both necessary to prevent imminent harm and proportionate to that risk of harm. The bill also generally precludes officers from using rubber pellets, chemical weapons, or canine units against a crowd. Violations of any of these provisions may provide grounds for an officer to have their certification suspended or revoked.
Legislation enacted in Minnesota (2020 MN HF 1) makes changes to the state’s use of force laws, including limiting the authority of police officers to use deadly force unless based on a specific threat likely to occur absent action by the officer, and one that requires the officer to address it through the use of deadly force without unreasonable delay. This law also provides that an officer must be able to articulate the threat with specificity and restricts the use of deadly force in cases where the person only presents a danger to themself.
Nevada lawmakers enacted legislation (2020 NV AB 3) to prohibit the use of chokeholds by law enforcement officers on another person or placing a person who is in custody of a law enforcement officer in any position that restricts their ability to breathe. The bill also amends existing statute to clarify that “only the amount of reasonable force necessary to effect the arrest” may be used if a defendant flees or forcibly resists, whereas previous law provided for the use of “all necessary means.”
New Hampshire lawmakers (2020 NH HB 1645) enacted legislation to prohibit the use of chokeholds by law enforcement officers, except to defend themself or a third person from imminent deadly force.
Lawmakers in New York approved the “Eric Garner Anti-Chokehold Act” (2019 NY S 6670/A 6144), which creates a new class C felony offense for “aggravated strangulation.” Under the new law, law enforcement officers who obstruct breathing or blood circulation or use a chokehold, as is prohibited under existing law, and cause serious physical injury or death to another person is guilty of aggravated strangulation.
Oregon legislators enacted a bill (2020 OR HB 4203) to ban the use of chokeholds unless deadly physical force is otherwise allowed under the law. The bill also directs the state Board on Public Safety Standards and Training to adopt new rules for police and reserve officer training requirements that reflect the new prohibition of the use of chokeholds.
Later in the year, Oregon lawmakers passed another bill (2020 OR HB 4301) updating the recently-enacted chokehold ban to include corrections officers and removing the exception on the use of chokeholds in circumstances where use of deadly force is allowable. Under the new law, officers must give a verbal warning, allow time for compliance, and use of de-escalation tactics before physical and deadly uses of force.
Legislators in Utah passed a bill (2020 UT HB 5007) to prohibit the use of chokeholds, defined as “the application of a knee applying pressure to the neck or throat of a person” by peace officers. The bill provides for a referral to the county or district attorney for review and to the state’s Peace Officer Standards and Training Council for investigation and classifies the prohibited restraint as a third-degree felony, a second-degree felony if it results in serious bodily injury or loss of consciousness, or a first-degree felony if it results in death. The bill further prohibits the inclusion of chokeholds in peace officer training curriculum approved by the state.
Utah lawmakers also enacted a bill (2021 UT SB 106) to require the state’s Peace Officer Standards and Training Council to establish minimum use of force standards. The new law also requires compliance with the use of force standards by peace officers and enforcement of the standards by law enforcement agencies.
Another bill (2021 UT HB 237) passed by the Utah legislature limits the proper use of deadly force to prevent death or serious bodily injury to the officer or an individual other than the suspect. Prior law authorized the use of deadly force in instances where someone posed a threat of death or serious bodily injury to themselves, in addition to the officer or others.
In Vermont, lawmakers passed a bill (2020 VT S 119) to set new standards for use of force by law enforcement. Under the new law, use of force must be “objectively reasonable, necessary, and proportionate” and “based on the totality of circumstances.” Another bill (2020 VT S 219) passed by legislators banned the use of chokeholds and amended the state’s existing code of unprofessional conduct of law enforcement officers to include the use of chokeholds and failing to intervene and report when observing another officer using a prohibited restraint or using excessive force.
Virginia legislators enacted a bill (2020 HB 5069) to define and prohibit the use of neck restraint by law enforcement officers, unless its use is “immediately necessary to protect the law-enforcement officer or another person.” The bill creates a new disciplinary penalty, in addition to existing penalties under the law, for the use of neck restraints, including dismissal, demotion, suspension, transfer, or decertification.
Legislators in Washington enacted a bill (2019 WA HB 1064) to narrow the state’s criminal statutes on the use of deadly force by law enforcement officers to an objective standard of good faith that “a similarly situated reasonable officer would have believed that the use of deadly force was necessary to prevent death or serious physical harm to the officer or another individual.” Previously, state statute also provided for use of deadly force under a subjective good faith test that the officer “intended to use deadly force for a lawful purpose and sincerely and in good faith believed that the use of deadly force was warranted in the circumstance,” in addition to an objective good faith test.
Duty to Intervene and Report Misconduct
Police reform legislation enacted in Colorado (2020 CO SB 217) requires a police officer to intervene when another officer is using unlawful physical force and requires the intervening officer to file a report regarding the incident. If a police officer fails to intervene when required, the police standards board is required to decertify the police officer.
Comprehensive policing reform legislation in Connecticut (2020 CT HB 6004) requires police and correction officers to intervene when fellow officers use unreasonable, excessive, or illegal force and to report on those incidents. This law also prohibits law enforcement units and the department of corrections from retaliating against an intervening and reporting officer.
Criminal justice reform legislation enacted in Illinois (2021 IL HB 3653) provides both a duty to intervene for police officers to prevent or stop another police officer from using unauthorized or excessive force, and also a duty to render medical aid and assistance, including performing CPR and getting an injured suspect to a hospital.
Kentucky enacted legislation (2021 KY SB 80) to include failure to intervene when it is clear that a fellow police officer is using unlawful and unjustified excessive or deadly force as a form of professional nonfeasance that can lead to termination and decertification as a police officer.
Maryland legislation (2021 MD SB 71) requires a police officer to intervene to prevent or terminate the use of force by another police officer that goes beyond what is authorized by law, and it requires an officer to render basic first aid to a person injured as a result of police action and promptly request appropriate medical assistance.
Massachusetts police reform legislation (2020 MA SB 2963) requires a police officer to intervene to prevent the use of unreasonable force and report the incident to an appropriate supervisor. The law also requires each law enforcement agency to develop procedures to report abuse by fellow police officers without fear of retaliation.
Legislation enacted in Minnesota (2020 MN HF 1) establishes a duty for police officers to intercede when another officer is using excessive force and report incidents of excessive force to supervisors. Failure of a police officer to intercede or report excessive force subjects the officer to police standards and training board discipline.
Nevada legislators enacted a bill (2020 NV AB 3) requiring any peace officer to monitor any person in their custody for signs of distress and to take actions to place them in a recovery position if necessary. The bill also requires any peace officer who uses physical force on another person to ensure that medical aid is rendered as soon as practicable. Finally, peace officers are required to prevent or stop another officer from using physical force that is not justified, and to report the incident to their immediate supervisor in writing within 10 days.
In New Hampshire, legislators enacted a bill (2020 NH HB 1645) to require law enforcement officers to report misconduct by other officers. Under the new law, officers must report the misconduct to the chief law enforcement officer in their department, or the Police Standards and Training Council if the chief officer is the subject of the report, in writing immediately, or as soon as practicable. The chief law enforcement officer must notify the Police Standards and Training Council of the misconduct in writing within 7 days. The bill further requires law enforcement departments to conduct an investigation of reports of misconduct in a timely manner.
In New York, lawmakers passed legislation (2019 NY S 6601/A 8226) to affirm the duty of law enforcement officers to provide medical and mental health attention to a person under arrest or otherwise in their custody. The bill further creates a civil cause of action for any person who has not received such medical attention and as a result, suffers serious physical injury or significant exacerbation of an injury or condition.
Oregon lawmakers enacted a bill (2020 OR HB 4205) to require police and reserve officers to intervene to prevent or stop another officer engaged in an act of misconduct, and to report such an act to a supervisor as soon as practicable, but no later than 72 hours after witnessing the misconduct. Under the new law, failure to intervene or report constitutes grounds for disciplinary action by the agency or grounds for suspension or revocation of the officer’s certification by the Department of Public Safety Standards and Training. Finally, the bill provides anti-retaliation protections to officers who intervene or report misconduct of another officer.
A bill (2020 VA HB 5029) passed in Virginia requires law enforcement officers to intervene when witnessing another officer engaging in or attempting to engage in the use of excessive force. Officers are also required to end the use of force or prevent its further use where feasible, to render aid to any person injured as a result of the use of excessive force, and to report the misconduct. Law enforcement officers who fail to comply with the new law are also subject to disciplinary action.
No-Knock Search Warrants
Legislation in Illinois (2021 IL HB 3653) was enacted to, among other things, require police departments to develop plans to protect children or other vulnerable people present during search warrant raids.
Recently enacted Kentucky legislation (2021 KY SB 4) prohibits the issuance of a no-knock arrest warrant unless for specific suspected violent offenders and, based on established facts, giving notice prior to entry will endanger the life or safety of an individual, or result in the loss or destruction of evidence. Another bill, “Breonna’s Law” (2021 KY HB 21), which was developed in response to the murder of Breonna Taylor during the execution of a no-knock warrant with input from community members failed to advance
In Maryland, lawmakers enacted a bill (2021 MD SB 178) over a gubernatorial veto that amends the process for the execution of search warrants and narrows the use of no-knock search warrants. Under the new law, unless exigent circumstances are determined to exist, no-knock search warrants shall only be executed between 8 am and 7 pm.
Comprehensive police reform legislation in Massachusetts (2020 MA SB 2963) places strict limits on the use of so-called “no-knock” warrants, requiring such warrants to be issued by a judge and only in situations where an officer’s safety would be at risk if they announced their presence and only where there are no children or adults over the age of 65 in the home. The legislation provides for an exception when those children or older adults are themselves at risk of harm. Virginia lawmakers passed a bill (2020 VA HB 5099) banning no-knock search warrants. The bill also requires that warrants be executed in the daytime unless law enforcement can provide good cause for nighttime execution of warrants. Another bill (2021 VA SB 1475) passed by legislators clarifies that the ban applies to “any place of abode,” and that daytime hours are considered between 8 am to 5 pm.
Overpolicing
California enacted legislation (2020 CA AB 1215) prohibiting a law enforcement agency or officer from installing, activating, or using any biometric surveillance system in connection with or data collected by an officer camera. The law authorizes a person to bring an action for equitable or declaratory relief against an agency or officer who violates that prohibition. California also enacted legislation (2020 CA AB 1775) that increases the penalty for a violation if a person knowingly allows the use of or uses the 911 emergency system for the purpose of harassing another. The penalty increases if the act is defined to be a hate crime.
Comprehensive policing reform legislation in Connecticut (2020 CT HB 6004) makes a number of changes to limit the frequency or extent of police interactions with the public. The Connecticut law limits the circumstances under which law enforcement officials may conduct consent searches on (1) an individual’s body and (2) motor vehicles stopped solely for motor vehicle violations. This law also generally prohibits law enforcement from asking for non-driving identification or documentation for stops solely for motor vehicle violations. And the new law raises the penalties for false reporting crimes or misusing the emergency 9-1-1 system when committed with the specific intent to do so based on certain characteristics of the reported person or group (e.g. race, sex, or sexual orientation). Finally, it prohibits municipal police departments and the Connecticut Department of Emergency Services and Public Protection from imposing pedestrian citation quotas on their police officers.
A recently enacted bill in Illinois (2021 IL HB 3653) may reduce police traffic stops by eliminating license suspensions for unpaid fines and fees due to red light cameras and traffic offenses.
Legislation recently enacted in Maryland (2021 MD HB 670) requires that absent exigent circumstances, at the commencement of a traffic stop or other stop, a police officer must (1) display proper identification to the stopped individual and (2) provide specified identifying information regarding the officer and the reason for the traffic stop or other stop. A police officer may not prohibit or prevent a citizen from recording the police officer’s actions if the citizen is otherwise acting lawfully.
Enacted legislation in Massachusetts (2020 MA SB 2963) requires law enforcement to seek a court order when conducting a facial recognition search, except in emergency situations.
In June 2020, New York enacted legislation (2020 NY A 1531) which amended civil rights laws in the state to include reporting a non-emergency incident to police and emergency services involving a member of a protected class. This law charges civil penalties for frivolously calling the police in order to target a member of a protected class, if no imminent threat or danger is detected by the officer.
Police Training and Screening
California enacted legislation (2019 CA SB 230) that requires the commission on police officer standards and training to implement courses of instruction for the regular and periodic training of law enforcement officers on de-escalation, implicit and explicit bias and cultural competency, use of force scenario training, alternatives to use of deadly force and physical force, and using public service, including the rendering of first aid, to provide a positive point of contact with the community. Legislators also enacted 2020 CA AB 846 which required the Commission on Peace Officer Standards and Training to study and update regulations and screening materials to identify explicitly and implicit biases against protected classes related to emotional and mental evaluations of officers. It also requires evaluations of peace officers to include evaluations of biases against protected classes. Lastly, it requires law enforcement to change job descriptions to deemphasize paramilitary aspects of the job and to place more emphasis on community interaction and collaboration.
Another bill passed in California (2020 CA AB 3099) would require the Department of Justice to provide technical assistance related to tribal issues to local law enforcement agencies and tribal governments with Indian lands. Such assistance includes guidance for law enforcement education and training on policing and criminal investigations on Indian lands. The bill also requires the department to conduct a study to determine how to increase state criminal justice protective and investigative resources for reporting and identifying missing Native Americans in California, particularly women and girls.
Police reform legislation enacted in Colorado (2020 CO SB 217) gives the police standards and training board the authority to revoke a police officer’s certification if the officer fails to complete a required training after being given 30 days notice to satisfactorily complete the missed training.
Enacted legislation in Connecticut (2020 CT HB 6004) adds implicit bias training to required police training components.
The D.C. Council passed legislation to change existing continuing education requirements for law enforcement officers to include “biased-based policing, racism, and white supremacy,” “obtaining voluntary, knowing, and intelligent consent from the subject of a search,” and the duty of an officer to report misconduct or excessive force by another officer.
Illinois recently enacted legislation (2021 IL HB 3653) to require police officer training on topics such as proper use of force techniques, de-escalation, implicit bias and racial and ethnic sensitivity.
Recently enacted legislation in Indiana (2021 IN HB 1006) requires the Indiana law enforcement training board to establish mandatory training in de-escalation as part of the use-of-force curriculum, and requires de-escalation training to be provided as a part of: (1) pre-basic training; (2) mandatory inservice training; and (3) the executive training program.
Legislation enacted in Iowa (2020 IA HF 2647) requires the Iowa Law Enforcement Academy (ILEA) Council in consultation with the Iowa Civil Rights Commission, advocacy organizations, and various interest groups and stakeholders, to develop, provide, and disseminate mandatory annual training to every law enforcement officer employed by a law enforcement agency on matters related to de-escalation techniques and the prevention of bias.
Recent Maryland legislation (2021 MD SB 71) requires police officers to undergo training on when an officer may or may not draw a firearm, point a firearm at a person, and the enforcement options that are less likely to cause death or serious physical injury, including de-escalation tactics. Related legislation (2021 MD HB 670) requires all law enforcement agencies to use implicit bias testing in the hiring process and requires all police officers to complete implicit bias testing and training annually.
Comprehensive legislation in Massachusetts (2020 MA SB 2963) provides for police training on de-escalation and disengagement, alternatives to use of force for children, community trust building, and cultural competency.
Minnesota legislation (2020 MN HF 1) prohibits the police officer standards and training board from approving “warrior-style” training and prohibits police chiefs from providing that training to their officers.
Nebraska state legislators recently enacted a law (2020 NE LB 924) which required law enforcement agencies to adopt racial profiling prevention policies. This law adds anti-bias and implicit bias training and testing to minimize racial profiling, and also requires law enforcement officers to record the race and ethnicity of people they stop. Lastly, the bill requires two hours of anti-bias and implicit bias training to the continual education requirements for law enforcement officers and sheriffs.
In Nevada, legislators enacted a bill (2019 NV AB 478) that updates existing continuing education requirements for peace officers to include no less than 12 hours in courses that address racial profiling, mental health, the well-being of officers, implicit bias recognition, de-escalation, human trafficking, and firearms.
Lawmakers in New Hampshire enacted a bill (2020 NH HB 1645) that redirects existing funds from the Drug Forfeiture Fund to reimburse local governments or the state for psychological stability screenings for law enforcement officer candidates.
Pennsylvania legislators unanimously approved a bill (2020 PA HB 1910) that updates mandatory training requirements for police officers to include training on trauma-informed care, use of deadly force, de-escalation and harm reduction techniques, community and cultural awareness, implicit bias, procedural justice, and reconciliation techniques. The bill also creates a new requirement for mental health evaluations and related treatment upon the request of an officer, the recommendation of their chief or supervising officer, or within 30 days of an incident of the use of lethal force.
State legislators in Utah enacted a bill (2021 UT HB 0162) to create new required training for law enforcement officers in mental health and crisis intervention responses, arrest control, and de-escalation tactics. This bill also requires annual reporting of training hours by department.
Incident Response
A father and son participate in a Black Lives Matter protest in Orlando, Florida. Sign reads, "Enough is Enough! #BlackLivesMatter"
Investigations of police interactions that result in death or other serious incidents that are shrouded in secrecy, influenced by the offending police officer, and/or conducted by a biased entity degrade public trust in law enforcement agencies. Adequate levels of independence in any response to a critical incident caused by a law enforcement officer ensure that future measures of accountability honor the truth of what occurred.
State lawmakers can ensure that responses to serious incidents are independent and faithfully carry out justice under the law by increasing reporting requirements, protecting the right of witnesses to record incidents, preserving the integrity of available recordings, and requiring an independent investigation of incidents.
Reporting In-Custody Deaths or Incidents
Illinois legislators enacted sweeping criminal justice and police reforms with the passage of 2019 IL HB 3653, including new requirements for law enforcement agencies to increase transparency and accountability. The bill requires agencies to investigate and report incidents in which a person dies while in custody or as a result of an officer’s use of force to the state Criminal Justice Information Authority within 30 days of the death. Such reports shall be open to public inspection, and an annual report on in-custody deaths, disaggregated by race, gender, sexual orientation, and gender identity shall be published annually.
Legislation (2019 NY S 2575/A 10608) passed in New York creates a new reporting requirement for any law enforcement officer who discharges their weapon where a person could be struck by a bullet from the weapon. The officer is required to make a verbal report within 6 hours to their supervisor and file a written report within 48 hours of the incident.
A bill (2021 UT HB 264) passed in Utah creates new reporting requirements when law enforcement officers point a firearm at an individual or aim a “conductive energy device at an individual and displays the electrical current.” The officer is required to file a report with information about the incident within 48 hours to their agency.
Right to Record
In Nevada, lawmakers enacted a bill (2020 NV AB 3) that protects the right of any person not under arrest or in the custody of a peace officer to record law enforcement activity and to maintain custody and control of the recording and any instruments used to make the recording. The bill prohibits peace officers from interfering with such recordings or seizing the recording or instruments used to record.
New York legislators passed the “New Yorker’s Right to Monitor Act” (2019 NY S 3253/A 1360), which affirms the right of any person not under arrest or in the custody of law enforcement officials to record law enforcement activity and to maintain custody and control of the recording and any instrument used to make the recording. The legislation also creates a private right of action for any unlawful interference with recording a law enforcement activity.
Police Body Cameras and Dashboard Cameras
Beginning in July 2023, a comprehensive police reform bill enacted in Colorado (2020 CO SB 217) requires all police officers, with some exceptions, to wear and activate a body-worn camera when responding to a call for service or during any interaction with the public initiated by the peace officer when enforcing the law or investigating possible violations of the law.
Enacted legislation in Connecticut (2020 CT HB 6004) expands the requirement to use body cameras to police officers in all state, municipal, and tribal law enforcement units, and it requires these officers to use dashboard cameras in police patrol vehicles.
The D.C. Council enacted legislation (2020 DC B23-0825) to require the release of unredacted body-worn camera footage within 5 business days to the Council upon request. The Mayor is also required to publicly release the names and body-worn camera recordings of all officers involved in incidents of death or serious use of force, with input on a public release from the victim or decedent’s next of kin. Under the new law, officers are prohibited from viewing recordings to assist in initial report writing.
Recent legislation in Illinois (2021 IL HB 3653) requires the use of body-worn cameras by police departments statewide, with a phase-in from 2022 to 2025 depending on the size of the municipality and county.
A recently enacted bill in Indiana (2021 IN HB 1006) specifies that a law enforcement officer who turns off a body-worn camera with the intent to conceal a criminal act commits a Class A misdemeanor.
Legislation enacted in Maryland (2021 MD SB 71) provides that all law enforcement agencies must require the use of body-worn cameras by July 1, 2025, with the state police and a few selected counties starting two years earlier.
In New Mexico, the state legislature passed and enacted a bill (2020 NM SB 8) to require municipal, county, and state law enforcement officers to wear a body-worn camera while on duty. It also requires law enforcement agencies to establish policies and regulations around their use, such as requiring them to be on during public interactions or requiring videos to be retained by the agency for at least 120 days.
New York lawmakers passed a bill (2019 NY A 8674/S 8493) to require all state police officers to wear body-worn cameras at all times while on patrol. Under the new law, the cameras are required to record certain actions and interactions with the public. The bill also authorizes the attorney general to investigate instances where body cameras fail to record an event that is required to be recorded by the new law.
Independent Investigation of Deaths or Other Incidents
In California, legislators enacted a bill (2020 CA AB 1506) that requires an investigation by a state prosecutor for any officer-involved shooting that results in the death of an unarmed civilian. The bill also establishes a Police Practices Division within the CA DOJ and directs the Attorney General to review deadly use of force policies for law enforcement agencies upon request.
California lawmakers also enacted legislation (2020 CA AB 1185) to authorize a county to create a sheriff oversight board and an inspector general's office and further authorizes those entities to issue a subpoena when conducting an investigation of police officers or the sheriff’s department.
Enacted legislation in Connecticut (2020 CT HB 6004) allows towns to enact municipal ordinances to establish civilian police review boards. The Connecticut law also estables a state office of the inspector general to investigate police officer use of force and to prosecute any case in which the inspector general determines the use of force was unjustified or when a police officer fails to intervene or report such incident. The office of the inspector general can also make recommendations to the police standards and training board concerning censure and suspension, renewal, cancellation, or revocation of a police officer’s certification. Finally, the new law generally requires the chief medical examiner to investigate deaths of people in police or department of corrections custody.
Councilmembers in D.C. enacted legislation (2020 DC B23-0825) to amend the process for investigating complaints filed by the public against law enforcement officers through the Police Complaints Board. The new law expands the 5-member board to 9 and prohibits any member from having a current affiliation with any law enforcement agency, where previously one member of the board could be law enforcement-affiliated. The bill also expands the District’s existing Use of Force Review Board by adding new civilian voting members, including one civilian member with personal experience with the use of force by a law enforcement officer.
Legislation in Iowa (2020 IA HF 2647) authorizes the Attorney General (AG) to prosecute a criminal offense committed by a law enforcement officer, which arises from the actions of the officer resulting in the death of another person, regardless of whether the county attorney requests the assistance of the AG or decides to independently prosecute the criminal offense committed by the officer. Should the AG determine that criminal charges are not appropriate, but that an officer has violated conduct standards, the AG may refer the matter to the Iowa Law Enforcement Academy (ILEA) Council to make a recommendation to suspend or revoke the officer’s certification.
Enacted legislation in Massachusetts (2020 MA SB 2963) creates a division of police standards to investigate officer misconduct and make disciplinary recommendations to the police standards and training commission. The division of police standards shall initiate a preliminary inquiry into the conduct of a law enforcement officer if the commission receives a complaint, report, or other credible evidence that is deemed sufficient by the commission that the law enforcement officer was involved in an officer-involved injury or death; committed a felony or misdemeanor, whether or not the officer has been arrested, indicted, charged or convicted; or violated use of force standards or the duty to intervene.
Minnesota enacted legislation (2020 MN HF 1) establishes an independent Use of Force Investigations Unit in the Bureau of Criminal Apprehension (BCA). The unit is responsible for investigating all officer-involved deaths in the state as well as criminal sexual assault allegations made against peace officers. The unit expires after four years.
Legislators in Nevada enacted a bill (2020 NV SB 2) that rolls back some provisions of the state’s “Peace Officer Bill of Rights,” including repealing a statute that prohibits the inclusion of a law enforcement officer’s statements from an internal investigation in a civil case. The bill also expands the authority of an agency to conduct investigations of a police officer, including increasing the statutory limit to launch investigations from 1 year to 5 years after the incident and allowing officers to be reassigned during an investigation without their consent. Finally, the bill amends the process for investigating a police officer by only allowing for the inspection and copying of evidence after the conclusion of an investigation, instead of during the investigation.
Lawmakers in New Jersey enacted legislation (2019 NJ S 1036) that permits the Attorney General to supersede the county prosecutor of the county where the incident occurred “whenever a person’s death occurs during an encounter with a police officer or other law enforcement officer acting in the officer’s official capacity or while the decedent was in custody,” to conduct any investigation, criminal action or proceeding concerning the incident. This bill also requires that “the identity of each investigating and arresting officer shall remain subject to public disclosure.”
New York legislators also enacted a bill (2019 NY S 2574/A 1601) to establish the Office of Special Investigation within the office of the state’s Attorney General to investigate and prosecute any alleged criminal offense or offenses committed by a police or peace officer. The office is required to publish a public report in cases where it declines to present evidence to a grand jury and in cases where a grand jury declines to return an indictment.
Lawmakers in New York also passed legislation (2019 NY S 3595/A 10002) to create the Law Enforcement Misconduct Investigative Office within the office of the state’s Attorney General with broad independent oversight over police misconduct. The new office has jurisdiction to receive and investigate allegations of misconduct in any law enforcement agency within the state and is also charged with making recommendations to agencies regarding policy and practice. Additionally, any officer or employee of a law enforcement agency is required to report information concerning corruption, fraud, use of excessive force, criminal activity, conflicts of interest, or abuse of power to the office.
The Utah legislature also enacted a bill (2021 UT HB 22) to require that the state’s chief medical examiner investigate and certify the cause of death in the cases of deaths resulting directly from the actions of a law enforcement officer. The bill also creates new criminal penalties for improper certification of the cause of death under the new law and for knowingly providing false information to mislead the medical examiner.
Virginia legislators authorized (2020 VA HB 5055/SB 5035) new citizen oversight powers over local law enforcement agencies. The new law authorizes localities to establish a civilian oversight body with broad authority to receive and investigate civilian complaints regarding law enforcement conduct, investigate and issue findings on incidents regarding the conduct of officers, make binding disciplinary determinations, investigate the policies of agencies and make recommended changes, review internal investigations and issue findings on the sufficiency of such investigations, make budgetary recommendations for agencies, and issue public reports on the activities of the body. The oversight body may issue subpoenas in the performance of its duties, and current law enforcement officers are not eligible to serve on the oversight body, except that retired officers who have not previously served in the law enforcement agency within the boundaries of the locality may serve as a non-voting ex officio member.
Accountability
Demonstrator holding "Black Trans Lives Matter" sign in New York City
For as long as publicly-funded police forces have existed in the country, officers who commit brutal violence against Black people have habitually eluded any measure of accountability. Officers have been insulated from professional and judicial repercussions through layers of legal protections and collective bargaining agreements, allowing them to continue a pattern of misconduct and abuse of power against the communities they are charged to protect.
State lawmakers can strengthen accountability measures against law enforcement officers who violate standards of conduct and constitutional and civil rights by reinforcing disciplinary actions against officers, ensuring that collective bargaining agreements do not interfere with disciplinary actions, requiring public and agency access to the personnel records of officers with a history of misconduct to prevent their re-hiring, and banning qualified immunity.
Disciplinary Actions
A comprehensive police reform bill enacted in Colorado (2020 CO SB 217) requires the Colorado Peace Officer Standards and Training (POST) Board to permanently revoke the certification of a police officer who is found criminally guilty or civilly liable of unlawful use or threatened use of physical force or the failure to intervene in another officer's use of unlawful force. This law also requires POST to create and maintain a database containing information related to a police officer’s untruthfulness, repeated failure to follow POST board requirements, decertification, and termination for cause.
Enacted legislation in Connecticut (2020 CT HB 6004) expands the reasons that the police standards and training board could use to revoke a police officer’s certification to include conduct undermining public confidence in law enforcement or excessive or unjustified force. It also prohibits a decertified police officer from acquiring a security service license or performing security officer work.
The Illinois legislature passed a police criminal justice reform bill (2021 IL HB 3653) that creates a more robust certification system and lays out standards and processes for decertification of police officers, including the option to do so for exercising excessive use of force or failing to intervene to stop another officer from excessive use of force. The new law also expands accountability across police departments by requiring the permanent retention of police misconduct records and removes the sworn affidavit requirement when filing police misconduct complaints.
Indiana enacted legislation (2021 IN HB 1006) to establish a procedure to allow the Indiana law enforcement training board to decertify an officer who has committed misconduct. It also provides that decertification proceedings may continue for a police officer who resigns or retires before a finding and order have been issued concerning a violation. Another section of the law requires an agency hiring a law enforcement officer to request the officer's employment record and certain other information from previous employing agencies, requires the previous employing agency to provide certain employment information upon request, and provides immunity for disclosure of the employment records.
Legislation enacted in Iowa (2020 IA HF 2647) established circumstances under which the Iowa Law Enforcement Academy (ILEA) Council is required to revoke, or may suspend or revoke, a certification of a law enforcement or reserve police officer, and when the ILEA may deny an application of a law enforcement officer from another state seeking employment at a law enforcement agency in the state.
Kentucky enacted legislation (2021 KY SB 80) to include unjustified excessive or deadly force as a form of professional malfeasance that can lead to termination and decertification as a police officer.
Maryland legislation (2021 MD HB 670) allows for the suspension or revocation of a police certification for violating use of force laws and requires the revocation for a police officer who was previously fired or resigned while being investigated for serious misconduct or use of excessive force.
Legislation in Massachusetts (2020 MA SB 2963) creates a mandatory certification process for police officers through the Massachusetts Peace Officer Standards and Training Commission (POST). The Commission, through a majority civilian board, will certify officers and create processes for decertification, suspension of certification, or reprimand in the event of certain misconduct, including excessive use of force or use of a chokehold.
In New Mexico, the state legislature passed and enacted a bill (2020 NM SB 8) that would require a police officer’s certification to be permanently revoked if they are convicted or if they plead guilty to a crime of unlawful use of force, threatened unlawful use of force, or failing to intervene when unlawful use of force occurs. It also establishes that police officers who do not comply with body camera requirements are presumed to be acting in bad faith.
Lawmakers in Utah enacted legislation (2021 UT HB 62) to expand the authority of the state’s Peace Officer Standards and Training Council to take disciplinary action, including decertification, against a peace officer for “conduct that involves dishonesty or deception” in violation of agency policy or state or federal law, and for engaging in “biased or prejudicial conduct” based on “race, color, sex, pregnancy, age, religion, national origin, disability, sexual orientation, or gender identity.”
Legislation (2020 VA HB 5051) enacted in Virginia expands the existing statutory process for the decertification of officers to require that agencies notify the state Criminal Justice Services Board when a law enforcement officer is terminated or resigns for engaging in serious misconduct, while under investigation for serious misconduct, or for an act that constitutes exculpatory or impeachment evidence in a criminal case. The bill also requires notice when an officer is terminated or resigns for violating a state or federal law or in advance of being convicted of a felony offense. Existing law only required notification to occur when officers resign in advance of a decertification offense or a pending drug screening. Finally, the bill authorizes the Criminal Justice Services Board to initiate decertification proceedings against current law enforcement or jail officers for such activities, where the Board was previously only authorized to initiate proceedings against former officers for failing to comply with training requirements.
Collective Bargaining Agreements
Enacted legislation in Connecticut (2020 CT HB 6004) explicitly prohibits police union collective bargaining agreements (CBAs) from barring disclosure of certain disciplinary actions, and it specifies that the Freedom of Information Act (FOIA) prevails over contrary CBA provisions.
The D.C. Council passed legislation (2020 DC B23-0825) that amends existing law to require that “all matters pertaining to the discipline of law enforcement personnel shall be retained by management and not be negotiable,” which explicitly applies to “any collective bargaining agreements entered into with the Fraternal Order of Police/Metropolitan Police Department Labor Committee after September 30, 2020.”
Legislation in Maryland (2021 MD HB 670) repeals the Law Enforcement Officers’ Bill of Rights in its entirety and establishes new provisions relating to police accountability and discipline. A law enforcement agency may not negate or alter any of the requirements relating to specified police officer accountability and discipline through collective bargaining.
Oregon lawmakers passed a bill (2020 OR SB 1604) that would limit the likelihood that disciplinary actions taken against a law enforcement officer by the agency are later reversed or reduced through binding arbitration. Under the new law, if an arbitrator makes a finding on officer misconduct that is consistent with the agency’s findings, the arbitration award may not order action that differs from the disciplinary action imposed by the agency. The bill also establishes a “discipline guide” or “discipline matrix,” which outlines the parameters of discipline for acts of misconduct, to be adopted into the agency’s disciplinary policy as the result of a collective bargaining agreement.
Personnel Records and Hiring
Recent legislation in Arkansas (2021 AR HB 1197) requires any notice of separation sent to the Law Enforcement Commission on Standards and Training to include, if applicable: (1) the law enforcement officer retired while the subject of a pending internal investigation; (2) the law enforcement officer was separated due to excessive use of force, and/or (3) the law enforcement officer was separated for dishonesty or untruthfulness.
In D.C., councilmembers enacted legislation (2020 DC B23-0825) that renders any applicant ineligible for appointment as a sworn member of the Metropolitan Police Department if they were previously determined to have committed serious misconduct, terminated or forced to resign for disciplinary reasons, or resigned to avoid disciplinary action or termination.
Hawaii passed a law (2019 HI HB 285) that requires county police departments to disclose to the Legislature the identity of an officer upon an officer's suspension or discharge, and it allows for public access to information about suspended officers. The law also authorizes the law enforcement standards board to revoke certifications and requires the board to review and recommend statewide policies and procedures relating to law enforcement, including the use of force.
Lawmakers in Maryland enacted a bill (2021 MD HB 670) to require an individual who applies for a position as a police officer to disclose to the hiring law enforcement agency all prior instances of employment as a police officer and to authorize the hiring law enforcement agency to obtain the police officer’s full personnel and disciplinary record from each law enforcement agency that previously employed the police officer.
Massachusetts lawmakers passed a bill (2020 MA SB 2963) to create a publicly available, online database of decertification, suspension, and retraining orders that includes the names of all decertified or suspended officers, the date of decertification, or beginning and end dates of the suspension, the officer’s last appointing agency, and the reason for decertification or suspension. Additionally, the police standards and training commission shall cooperate with the national decertification index and other states and territories to ensure officers who are decertified by the commonwealth are not hired as law enforcement officers in other jurisdictions, including by providing the information requested by those entities.
A bill enacted in New Jersey (2020 NJ AB 744) requires that if law enforcement agencies consider appointing new officers with prior law enforcement experience, the hiring agency must request the applicant’s files from their previous law enforcement employers, including internal affairs and personnel files. The law also requires the other agencies to provide the information about the applicant to the hiring agency.
A bill passed in New York (2020 NY S 8496/A 10611) repealed a section of existing law that previously allowed law enforcement agencies to refuse to disclose personnel records. Under the new law, the disciplinary records of law enforcement officers can be requested through the state’s Freedom of Information Law, with redactions for personal or sensitive information.
Oregon legislators approved a bill (2020 OR HB 4207) to establish an online public database of records on officers whose certifications have been revoked or suspended. The bill also requires law enforcement agencies to request and review personnel records from all prior law enforcement agency employers of prospective applicants before extending an offer of employment.
In Pennsylvania, lawmakers unanimously passed a bill (2020 PA HB 1841) to create a statewide database with the separation records of law enforcement officers and requires agencies to complete a hiring report if prospective hires have a separation record including certain incidents, including the use of excessive force and discrimination. The bill also establishes new requirements for law enforcement agencies to conduct background investigations on applicants, including past separation records. Under the new law, agencies are required to provide employment information on applicants who are the subject of a background investigation upon request by a prospective employing law enforcement agency.
The Utah legislature enacted a bill (2021 UT SB 13) to increase reporting requirements to the state’s Peace Officer Standards and Training Council in cases where a law enforcement officer’s employment terminates during certain internal investigations. The bill also creates new requirements of law enforcement agencies and training academies to provide information about an applicant upon request.
Qualified Immunity
A comprehensive police reform bill enacted in Colorado (2020 CO SB 217) allows a person who has had their constitutional rights infringed upon by a police officer to bring civil action for the violation and provides that qualified immunity is not a defense to the civil action. Additionally, if the police officer’s employer determines the officer did not act in good faith and with a reasonable belief that the action was lawful, the police officer is personally liable for 5% of the judgment up to $25,000.
Comprehensive policing reform legislation in Connecticut (2020 CT HB 6004) establishes a civil cause of action against police officers who deprive an individual or class of individuals of the equal protection or privileges and immunities of state law, and it eliminates governmental immunity as a defense in certain lawsuits.
In New Mexico, state legislators enacted the “New Mexico Civil Rights Act” which allowed people to claim deprivation of any “rights, privileges, and immunities” guaranteed by the New Mexico Bill of Rights and to sue for damages in state district courts. This law requires these people to file suit against the public body itself and not the individual employed by the public body. This law also explicitly prohibits public bodies and those acting on the public body’s behalf from using qualified immunity as a defense.
System Oversight
Demonstrators march in Washington, D.C.
The violent realities of over-policing in Black communities and other communities of color are well-known by their residents, who are also best-positioned to develop the policy solutions necessary for lasting transformational change. But too often, state legislatures and institutional actors responsible for enacting policy change are not equitably representative of their communities, and therefore lack the lived experience and information necessary to make structural changes to policing systems.
At the state level, lawmakers can pave the way for broader changes by ensuring that communities have adequate access to data and oversight entities with decision-making power. State legislators can ensure that future reform efforts are informed by publicly available and disaggregated information on police interactions. Comprehensive data collection drives continuous oversight by identifying and investigating patterns of policing conduct that disproportionately harm communities of color. Legislators can also establish independent oversight bodies charged with reenvisioning policing and making policy recommendations with strong requirements for meaningful community participation.
Data Collection
A comprehensive police reform bill enacted in Colorado (2020 CO SB 217) requires the division of criminal justice in the department of public safety to collect and maintain a searchable, online database of aggregated data by state or local law enforcement agency on contacts conducted, unannounced entry, or use of force by police officers, as well as instances of police officers resigning while under investigation for violating department policies.
New York legislators passed a bill (2019 NY S 1830/A 10609) to create new data reporting requirements on misdemeanors and arrest-related deaths. Under the bill, law enforcement agencies are required to report arrest-related deaths to the Division of Criminal Justice Services, and the collected data must be made available online and updated monthly. The bill also requires the chief administrator of the courts to maintain an online database of the outcomes of misdemeanor offenses and violations, disaggregated by race, ethnicity, age, sex, and county. A bill (2020 VA HB 1250) enacted by legislators in Virginia prohibits “biased-based profiling” by law enforcement officers. The bill also creates new race and ethnicity data collection requirements for traffic stops by Virginia State Police officers, and creates a uniform statewide database for traffic stops, excessive force complaints, and other information collected by law enforcement agencies. The data analysis shall be used to determine the existence and prevalence of the practice of bias-based profiling and the prevalence of complaints alleging the use of excessive force.
Pattern or Practice Investigations
Comprehensive reform legislation enacted in Colorado (2020 CO SB 217) makes it unlawful for any governmental authority to engage in a pattern or practice of conduct by police officers that deprives individuals of rights, privileges, or immunities secured or protected by the constitution or laws of the United States or the state of Colorado. Whenever the state attorney general has reasonable cause to believe that a violation of this provision has occurred, the state attorney general may in a civil action obtain any and all appropriate relief to eliminate the pattern or practice.
Massachusetts police reform legislation (2020 MA SB 2963) refer patterns of racial profiling or the mishandling of complaints of unprofessional police conduct by a law enforcement agency for investigation and possible prosecution to the attorney general or the appropriate federal, state or local authorities. If the attorney general has reasonable cause to believe that such a pattern exists based on information received from any other source, the attorney general may bring a civil action for injunctive or other appropriate equitable and declaratory relief to eliminate the pattern or practice.
Under a bill (2020 VA SB 5024/HB 5072) passed by Virginia lawmakers, the state Attorney General is authorized to investigate law enforcement agencies for unlawful patterns or practice of conduct, such as racially biased policing patterns or excessive force, and to seek remedy through civil action or by entering into a court-enforceable conciliation agreement with the agency. Agencies that are found to be out of compliance with conciliation agreements are also subject to a loss of state funding.
Independent System Oversight
The D.C. Council enacted legislation (2020 DC B23-0825) to establish the Police Reform Commission to examine policing practices and provide recommendations for reforming and revisioning policing. Required members of the 20-member Commission includes criminal and juvenile justice reform organizations, Black Lives Matter DC, student- or youth-led advocacy organizations, returning services organizations, and returning citizen organizations. The new law does not include District law enforcement agencies on the Commission, but does not prohibit past affiliation with law enforcement agencies for eligibility as a member.
A bill (2020 OR HB 4201) passed by Oregon lawmakers establishes the Joint Committee on Transparent Policing and Use of Police Reform to examine and make recommendations to the legislature regarding policies to reduce the use of force by police officers and improve transparency in the investigation of its use.
Local and National Organizations
Mural artists collectively create street art in front of City Hall in Cincinnati, Ohio.
Many Black-led and centered organizations have been leading on policing, police reform, and abolition for years. We encourage you to seek information and support from this list below. Note this is not a comprehensive list and will be updated.
Executive Summary
