Sunday, July 16, 2006

The Unknown Candidate on the Minimum Wage vs. the EITC

The Unknown Candidate writes:
"The minimum wage is not a tax of any kind. It is an attempt to more fairly pay workers for work done. Every employer must pay wages to workers. It is a cost of doing business, not a tax."
I wholeheartedly disagree. As the saying goes, "A rose by any other name. . . ." And as far as taxes go, the minimum wage definitely passes the proverbial duck test. To wit, the Wikipedia article on the topic states:
"A tax (also known as a "duty") is a financial charge or other levy imposed on an individual or a legal entity by a state. . . . Taxes could also be imposed by a subnational entity. ¶ Taxes may be part of a direct tax or indirect tax, and may be paid in money or as corvée labor. . . .
I might add that the Unknown Candidate was demonstrating some remarkably two-dimensional thinking in failing to acknowledge that the primary objective of the minimum wage is the same objective that is accomplished by many taxes -- i.e., to redistribute income and wealth, which is something that is done much more effectively and equitably by the EITC.

The Unknown Candidate continues:
"The EITC does not bring wages up."
There's that two dimensional thinking again. Of course the EITC doesn't bring wages up. Nobody's saying that it does. What it does do is provide more income for the working poor and lift millions of them out of poverty. In many instances, EITC benefits exceed a taxpayer's income tax liability, and they get back more taxes than they paid in.

The Unknown Candidate continues:
"It decreases taxes on too low wages. Even if you remove all taxes from minimum wage workers, they are still below the poverty line."
This ignores the fact set forth above -- i.e., that EITC benefits can and often do exceed income tax liability and result in a negative income tax. You are also assuming that minimum wage workers are below the poverty line to begin with, and very few of them actually are. According to the United States Deparment of Health and Human Services, only 16 percent of minimum wage workers live in families with incomes below the poverty level, although another 12 percent are near poverty.

The Unknown Candidate continues:
"A source for your statistic . . . would be appreciated."
Well here it is: Citation.

The Unknown Candidate continues:
"What is missing from your argument is this: individual people are not statistics. A single mother with two kids cannot support her family at $5.15/hr with our without EITC.
Which means that the EITC should be expanded, because a single mother with two kids would have even more trouble supporting her two kids if she lost her job and was replaced by someone else, which is what typically happens to the small percentage of unskilled and uneducated people who are actualy making minimum wage when the minimum wage is raised. Don't believe me? Try reading the citation you requested of me which concludes that:
"Most research suggests that moderate minimum wages increases do not reduce poverty rates. [Italics emphasis in original.] . . . [M]inimum wage hikes increased poverty exits but also increased the probability that previously non-poor families entered poverty. . . . Overall the tradeoffs created by minimum wage increases, more closely resemble income redistribution among low-income families than income redistribution from high-to-low-income families."


Blogger Bill Bronner said...

The author ignores the fact that the EITC is an expense to the Federal Government and in turn results in a tax on all citizens and businesses rather than the business that is run so inefficiently that they cannot pay sustainable wages.

Why not allow the business which cannot be successful and simultaneously pay a sustainable wage be driven from the market. What is the better public purpose, to enable poorly run businesses to survive or encourage a wage rate that is not a drain on the welfare coffers and the general public's interest in not subsidizing a poor business model.

4:31 PM, August 27, 2006  

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