Speaker Pelosi's minimum wage act is really all about the taxes state and federal governments would take in on the backs of the minimum wage workers and their employers.
479,000 workers are reported to the Bureau of Labor Statistics as making the minimum wage. There are an additional 300,000 workers reported as earning exactly $5.00 an hour. If these workers were included along with those earning the current $5.15 minimum plus restaurant and drinking establishment and service industry workers the total estimated workers directly affected by the new minimum wage rules would be 1.9 million. There are an additional estimated 3.7 million workers who make above $5.15 and less than the $7.25.
Let's do the math on the 479,000 reported minimum wage workers using as a basis a single worker with no dependents other than themselves living in California.
Starting 60 days after the new minimum wage legislation is enacted hourly wages will be increased $.70 to $5.85 an hour or $234 gross pay a week netting $202.59 after income and payroll taxes. Increased net weekly income is $22.55 over the previous $5.15.
The $31.41 of increased income and payroll taxes gets the government $15 million a week or $780 million a year in new tax income from minimum wage workers.
An employer has total payroll expenses of $258.63 with Social Security – Medicare – Unemployment Taxes. The $24.63 in increased employer taxes generates some $615 million of new tax revenue paid to government coffers.
$1.4 billion of new increased tax revenue from minimum wage workers and employers is paid in taxes to the government from the first $.70 minimum wage increase.
The 2nd year minimum wage increase is $6.55. A worker receives $262.00 netting $224.84 after income and payroll taxes. Increased net weekly income is $44.50 more over the $5.15 minimum wage.
This $37.16 increase in taxes gets the government $17.8 million a week or $925 million in taxes paid by minimum wage workers.
An employer has payroll expenses of $288.77. The $26.77 in increased employer taxes generates $666 million of revenue paid to the government by employers.
$1.6 billion is paid to the government from minimum wage workers and employers in the 2nd year.
The 3rd Year minimum wage increase is $7.25. A worker would get gross pay of $290.00 netting $245.77 after income and payroll taxes. Increased net weekly income is $65.73 more over the $5.15 minimum wage.
The $44.23 in increased weekly income and payroll taxes generates $21 million to the government coffers from minimum wage workers or $1.1 billion annually.
An employer has payroll expenses of $318.92 and this $28.92 in increased employer taxes will generate some $720 million of revenue paid to the government by employers.
$1.8 billion is paid in taxes to the government from minimum wage workers and employers in the 3rd year.
Thus $4.8 billion is paid by the 479,000 minimum wage workers and their employers to the government in extra income and payroll taxes in first three years.
If these figures were applied to the 1.9 million minimum wage workers and their employers this would generate four times the $4.8 billion government revenue or $20 billion in extra government income.
If these figures were applied to the 3.7 million minimum wage workers and their employers this would generate 8 times the $4.8 billion government revenue or $38 billion in increased government revenues.
If the figures were applied to the number of minimum wage workers Speaker Pelosi is claiming of 7.5 million this would be almost 16 times the $4.8 billion or $75 billion in additional government revenue.
In pure general terms during the first three years the Speaker Pelosi pogrom against minimum wage workers takes an average of $6,000 out of their pockets with her be-knighted plan to help low-wage workers. Each employer has $4,000 taken out of their pockets for each minimum wage worker during the same period.
If Speaker Pelosi desires to help minimum wage workers do these things. Repeal the federal minimum wage law. Repeal income and payroll taxes for everyone earning below the federal poverty guidelines. Absolve all employers from providing matching payroll taxes for Social Security and Medicare for all workers earning below the federal poverty guidelines. This also increases the capital available to small business owners for new hiring and capital expansion.
Then by federal mandate, which is an extremely sad but unfortunate necessity to prevent states from adjusting their income taxes upward, require all states to repeal their income taxes for poverty level workers and their minimum wage laws. Further, require all states with a sales tax to put a floor of at least $100.00 on purchases as sales taxes is extremely regressive to low-wage workers.
I am certain we can count on Speaker Pelosi's compliance in these matters since she is so concerned about the welfare of low-wage workers and their employers.
January 17, 2007