Home Class Politics But Why Are We Happy About Taxing The Minimum Wage?

But Why Are We Happy About Taxing The Minimum Wage?

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This really does sound like an odd thing for a progressive to be applauding. The Biden recovery plan will lead to the poor paying more taxes. Sure, I agree it is likely to happen but why would we be happy about that?

However there’s a significant ancillary impact on the federal budget from raising the minimum wage, in two ways. First, when people make more money they become less reliant (at least under current eligibility restrictions) on federal safety-net programs, like Medicaid or SNAP (food stamps). Second, higher wages means more tax revenue, both in federal withholding and in payroll taxes that go to Social Security and Medicare.

The combination of these measures make the minimum wage hike not at all incidental to the budget. The Berkeley Labor Center estimates that workers who would receive a wage increase in this bill receive $107 billion per year in safety net support. That wouldn’t be the budget impact—you have to factor in whether some of that spending is state money, and whether some safety net spending would continue, and the impact of tax revenue. There are also other workers not considered in CBO’s initial score, like the 3 million home healthcare workers paid out of Medicaid funds.

But there’s apparently a study coming soon that does all these calculations, finding that there’s a federal budget savings to raising the minimum wage of $65 billion per year.

Crank that up over the 10 year budget window and that’s $650 billion more. Or, the other way we can put this, that’s $650 billion Uncle Sam is going to be taking out of the pockets of the poor.

The big question here being why would a progressive like that outcome?

The correct answer to me is as I’ve said before:

All three of these reasons collide into an unanswerable argument that the standard deduction should be whatever the minimum wage is. For people earning below that minimum amount are the poor, as we have already been told, and who wants to tax the poor to pay for society?

To which the answer is:

Not only would it allow Democrats to pass a minimum wage increase through reconciliation, it would give them up to $650 billion in headroom to add additional fiscal measures to the bill.

Apparently progressives want to tax the poor. Because look at those lips being licked at the idea of being able to spend another $650 billion….

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7 COMMENTS

  1. Cool. The pollies raise their wages. Democrats good. Vote for them.

    But the evil employers and bureaucrats rob them of their gains. Must be all Republicans. Don’t vote for them.

  2. So they argue, reasonably, that there will be an increase in some tax revenues and a decrease in some gov’t spending due to the increased MW. Did they estimate the loss in taxes due to decreased profits (which are at much higher rates)? How about the increased gov’t costs from the lost jobs? Or the increase in Social Security benefits? I have a guess.

  3. The main reason to tax the minimum wage is the salutary effect of seeing how much the government gloms out of your wages. It’s a real eye-opener for would-be socialists entering the labor force.

  4. No representation without taxation? 🙂

    That was the local government franchise in the UK before 1948. My great-grandmother, my great-great-aunts, and my great-great-grandmothers had the vote well before 1918, being ratepayers.

    There were some great scams to get around the law in the name of election rights. Many in my family had shops, so couples would arrange for one of them to have the Household Vote, and the other had the Business Vote. Bingo, women voters, full adult franchise!

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