Democrats Drop Threat of Tax Penalties to Leverage a Minimum Wage Hike
Senate Democrats are back to square one in their search for a way to raise the federal minimum wage to $15 an hour after scrapping a plan to enact a punitive tax on companies that don’t pay the higher wage:
Economists and tax experts have said that the tax outlined by [Sen. Bernie] Sanders and [Sen. Ron] Wyden could be easily avoided and difficult to implement, with large corporations able to reclassify workers as contractors to avoid potential penalties.
That’s the official explanation. A more realistic one is the political explanation: the tax penalty imploded once it was made public. Why? Because even some Democrats aren’t comfortable weaponizing the tax code to enact progressive agenda items.
But for those Democrats who are serious about hiking the federal minimum wage can take up already existing stand-alone legislation.
Let the idea rise or fall on its own merits – and with its own vote tally.
Meanwhile, states are addressing minimum wage laws on their own. That’s federalism in action, and far preferable to a one-size-fits-all congressional mandate.
But what would be the longer-term effects of a federal minimum wage hike? Cato’s Scott Lincicome writes:
Higher federal minimum wages, particularly at $15 an hour, would benefit many low‐wage workers but impose significant costs on other workers (particularly those out of the labor force or with the lowest skills), companies, and/or consumers—even if they don’t actually destroy low‐wage jobs. (Indeed, that the $15 wage is phased in over several years is a tacit admission from Democratic sponsors that there will be some costs.) The specific channels through which those costs are imposed will vary, but it’s safe to assume that—especially given the current recession—they’ll be most acute for the people and companies already hardest hit by the pandemic, i.e., low‐skilled workers and smaller businesses in the leisure/hospitality and accommodation/food industries, and those located in lower‐cost states and localities.
All of this is common sense to anyone whose outlook extends beyond the next press release.
Image Credit: By Fibonacci Blue from Minnesota, USA [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons