I visit Capitol Hill with the Professional Beauty Association to talk about pending legislation that could save salon owners thousands of dollars. Part of a PBA Lobby Day team, I met with Congress members to help the beauty industry’s voice be heard.
Harlan Kirschner (right) of distributor The Kirschner Group Inc. was in a PBA board meeting for much of the day, but he joined Team CA-NV for the last few meetings. Also on Team CA-NV were Melanie Kopeikin (left) of distributor People in Beauty, and myself.
Waiting in the receiving area of Sen. Barbara Boxer’s office, I was puzzled as to why so many of the stops on the “Go Metro” map on the wall had the same names as the stops in my home of Los Angeles. Peering closer, I noticed the “L.A.” in the corner. Duh. I wasn’t looking at a map of Boxer’s adopted home of Washington D.C. I was looking at a map of her home state of California.
All of the Congress members whose offices we visited on PBA (Professional Beauty Association) Lobby Day displayed mementos of their home state or district. My home Rep. Dana Rohrabacher (parts of Long Beach) had mounted surfboards. Rep. Mike Thompson (Napa) had a bottle-shaped award from the Wine Institute. In the midst of the hectic craziness that is Capitol Hill — intermittently ringing bells announcing impending votes, advisors and aides scurrying by in suits, a shuttling underground tram reserved for Congress members and their guests — these pieces of office decor are constant reminders of the real reason these representatives and senators are here: to speak for the people, like us, who live back home.
It was May 25, and I was on Capitol Hill to connect with members of Congress and share my personal experiences (since I regularly talk to salon owners as part of my job at NAILS) to shed light on the just-introduced Small Business Tax Equalization and Compliance Act. Together with a team of volunteers mobilized by the PBA, we were here to get more Congress members to co-sponsor and vote for the bill.
The Small Business Tax Equalization and Compliance Act (also known as FICA Tax Credit Legislation, S. 974, and H.R. 1957) was introduced in the Senate on May 12 and the House on May 24. FICA stands for Federal Insurance Contributions Act, and if you’re a salon owner or salon employee in the United States you’re paying FICA taxes. (If you’re self-employed, you’re paying SECA, Self-Employment Contributions Act, taxes, which would be unchanged by this legislation.)
As a salon owner, you pay 7.65% in FICA taxes on all employee income, including the wages you pay and customer-paid tips. The employee (for example, the individual nail tech) pays the other 7.65%. What this bill would change is the part of salon owner-paid FICA taxes that covers tip-income. If the bill passes, that portion of FICA taxes would be credited back to the salon owner when she filed her taxes. She would still pay FICA taxes on the wages that she directly pays her employees, but the tip income that the owner never personally sees would no longer be her tax burden. She would get a dollar-for-dollar credit back on the FICA taxes for the reported tip income.
Obviously, that would be a huge windfall for salon owners, who could reinvest the money back into their salons. The PBA estimates the average salon owner would get back $11,000. (The exact credit for a specific salon depends on the number of employees, so for a one- to two-person nail salon, the credit will be less.) Also, the PBA says, it would likely increase accurate tip reporting. Perhaps most importantly, it would level the playing field between the restaurant industry and the salon industry. The restaurant industry has had this tax credit since 1993, which gives restaurant owners a dollar-for-dollar tax credit (now known as the 45(b) tax credit) on the employer’s share of FICA taxes paid on tip income above the minimum wage. Employers in the salon industry aren’t eligible to receive the 45(b) tax credit, even though their employees too earn a large portion of their income through tips received directly by employees, not by the salon.
The negative aspects of the bill (which we also had to address with Congress members) include causing the government to lose tax revenue, and still not having a completely level playing field as there may be other industries that rely on tip income that still would not be getting a FICA taxes credit.
The bill is touted as bipartisan. As of press time, it was co-sponsored by one Republican and one Democrat in the Senate, and three Republications and one Democrat in the House. This is the third time the bill has been introduced, but the bill has never been voted on because it’s too small to pass on its own. Small bills like this have to be tacked on to larger bills, I learned, to be voted on. In this case, it would need to be part of a larger tax bill or a small business bill.
Next page: Mobilizing and The Meetings