The $15 Minimum Wage Could Come With A Tax Increase For Everybody

By David Flemming

We can add a possible tax increase to the list of reasons not to adopt a $15 minimum wage. At the fourth and penultimate meeting of Vermont’s Minimum Wage Study Committee on October 30th, Rep. Helen Head (D-South Burlington) raised again the concern that employees who receive a raise could find themselves disqualified from receiving certain government benefits. In many cases, the loss of benefits would outweigh the increase in salary, creating a disincentive to work.

This dynamic is particularly acute when it comes to child care, as highlighted by the Childcare Financial Assistance Program, under which “each of the households would see a cumulative loss of benefits… an increase in wages would decrease the family’s child care benefit more than the amount gained by the wage increase, resulting in a net financial loss for the family.” Therefore, a $1 increase in income would often result in a loss in childcare benefits that exceeded $1.

The “solution” outlined in the report, increasing the threshold for benefits to negate harm, “would cost between $4.8 and $12.8 million annually.” This of course, would have to be funded by a reduction in spending in other parts of government (not likely!). Or, likely, an increase in taxes to cover those costs.

Also of note from the meeting, each of the six legislators acknowledged that Vermont would be facing some job losses with a minimum wage increase to $15/hour. How much the legislators care runs a wide gamut. Senator Brian Callomore (R-Rutland) sees any loss of jobs as unacceptable, stating, “Our local businesses are in a fragile state…should family leave pass, it would be a double whammy. I’m in favor of the current statute (of a minimum wage that increases with inflation).”

On the other side of the spectrum, Senator Michael Sirotkin (D-Chittenden) sees job losses as an acceptable cost of addressing “the most important driver of this discussion, [which] is wage inequality.” (Though it’s hard to reconcile the math behind some people getting a raise and other’s getting fired so that their wages go to zero, being a solution to “wage inequality.” Math would indicate this dynamic would increase rather than alleviate the problem.)

So, as we head into the fifth and final meeting of this committee before they make their recommendation to the full legislature, we’re looking at a policy that will certainly cost thousands of low-income Vermonters their jobs, will increase the cost of goods and services, put our businesses as a historically severe competitive disadvantage with New Hampshire, and could require a $12.8 million tax increase to smooth out the rough edges.

What part of this makes sense?

{ 3 comments… read them below or add one }

H. Brooke Paige November 1, 2017 at 8:41 pm

Self-Consuming Economic Insanity !

The Liberal Legislature dearly wants to raise the minimum wage to $15/hr. to fix all the problems for the working class. BUT WAIT, if they give these folks the raise, most will wind up with less money in their pockets as their benefits portfolio will shrink by more than their increased wages. WIC, EBT, childcare and Section 8 benefits would be reduced by at least a dollar for every extra dollar they would earn. The legislative solution is to raise the earnings threshold, however that will result in additional costs of between $4M and $12M annually for the state. No Problem ! – They will just raise taxes on a cornucopia of items (everything) to cover the additional expense, raising the cost of living and making living in Vermont even more expensive for everyone, including those the were hoping to help by raising the minimum wage !

This conundrum brings to mind the image of the snake eating its tail – the self-consuming society

Reply

William Hays November 4, 2017 at 2:57 am

Are you sure Sen. Michael Scrotum is just a “D”, and not a “S-P”?

Reply

Mike Powers November 4, 2017 at 11:32 pm

You cannot provide benefits that make the minimum wage unacceptable. It reminds me of the old milk, butterand guns equation. At some point the minimum wage must provide a benefit to the recipients that is greater than entitlement benefits. This is not ROCKET SCIENCE!!! Providing the various entitlements plus a minimum wage just increases the divide.

Reply

Cancel reply

Leave a Comment

Previous post:

Next post:

About Us

The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
Read more...

Latest News

A Modest Proposal on the Budget Impasse

June 20, 2018 by Rob Roper Yesterday 51 legislators voted to uphold Governor Scott’s veto of H.13, a tax/budget bill that would have raised property taxes on Vermonters....

Your Taxes, Game Theory and the Shutdown

June 12, 2018 By David Flemming Will your taxes increase or won’t they? As EAI has written on previously, there aren’t any mainstream proposals from the Governor or...

End of “Net Neutrality” Already Benefiting Vermonters

June 12, 2018 by Rob Roper The 2015 “net neutrality” rules passed by the FCC in 2015 are now officially dead. When the Trump administration announced that it...

Vermont: The Hapless Blue State

June 11, 2018 by Chris Campion Vermont, fresh off the news that the state’s idea of fixing its legacy of opposition to business and economic growth is to pay...

Trade, Tariffs, Trump

June 8, 2018 By John J. Metzler UNITED NATIONS—In the midst of an expanding American economy, record low unemployment rates, and buoyant consumer confidence, the Trump Administration has...

Video