Monday, January 08, 2007

Why Must Tax Cuts Accompany Everything?

This Wednesday, the House will vote on a minimum wage increase that has been almost 10 years in the making. This is the second longest span without an increase since the U.S. instituted a minimum wage, only topped by the Reagan era in the 80s. I understand that those free market folks (in the 80s and now) would just have us do away with the wage floor altogether, which was the rationale for the inaction of those Reaganomics folks. Unfortunately, while some would like the minimum wage to magically disppear, refusing to grant an increase doesn't make it so. Those free market gurus should either push to abolish the wage altogether or make sure it keeps up with inflation. But simply ignoring its existence only harms those folks who have to work for a living at $5.15. Minimum wage is now at its lowest value with respect to inflation since 1955, and a minimum wage worker who works 40 hours a week, 52 weeks a year still makes $6,000 less than the poverty level for a family of 3. Hopefully the increase that the Dems want as part of their "100 Hours" platform will pass the House easily and carry that momentum into the Senate, where passage looks to face a stiffer test.

But what is the problem with this increase? It seems like a no-brainer - 86% of Americans favor an increase, and 29 states and DC have already increased their wage floor since the feds last did. What's the hold up?

The problem lies with those legislators and their advisors who think that no bill can be passed without attaching some sort of tax cut. As a NYTimes op-ed put it the other day, "some politicians — mainly President Bush and Senate Republicans — seem incapable of viewing the issue as anything other than a pretext for more tax cuts." Previous incarnations of a minimum wage increase have been sabatoged by inclusion such tax breaks, like the linking of a minimum wage increase to a repeal of the estate tax last summer. I know it sounds like a broken record, but why must we always package any remotely targeted "help" with some sort of break for the rich or big business? Why can't we just pass the damn increase without building in measures that drive us deeper into debt and make this a political issue instead of one of common sense? Can't we just put through a clean bill that ONLY raises the wage?

And before we buy into all the talk about the harm to small business, we should consider whether the tax breaks that will likely be introduced in the Senate even help those business who claim to be affected. I'll end with the conclusion of the NYTimes article, which hits this point well:

"It’s even doubtful that the wage increase under discussion — a $2.10 increase over roughly two years, to $7.25 — would impair business. Eighty-six percent of small-business owners surveyed by the Wells Fargo/Gallup Small Business Index said the minimum wage had no effect on their businesses.

There’s also no reason to believe that the proposed tax cuts would be aimed at employers of low-wage workers. In 2006, when Congress tried to link the minimum wage to tax cuts, the proposals included an estate-tax cut for America’s wealthiest families. One proposal now being considered would allow small businesses to write off a larger part of their attorney fees when they go to court to challenge federal regulations. It sounds like a stretch to us that typical employers of minimum-wage workers — say, restaurants and small factories — are in any great need of relief from the high cost of federal litigation.

And then there’s the probability that tax cuts would cost the government far more than a wage increase would ever cost employers, driving up the budget deficit. The Economic Policy Institute analyzed the tax cuts that were linked to an unsuccessful attempt to raise the minimum wage in 2000. Those cuts would have cost $123 billion over 10 years, versus $11.2 billion for the wage increase.

It’s that sort of idiocy the new Congress was elected to stop. Chances are good the House of Representatives will eschew tax cuts and pass a clean bill to raise the minimum wage. The Senate should follow suit. And President Bush should sign it."



Anonymous -drm- said...

Amen, indeed.

6:17 AM  

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