The Democrats are back, and a minimum wage hike is one of the first orders of business. And for a change, it looks like Bush might be playing along. Of course, there's always a catch.

President Bush for the first time endorsed a specific plan for raising the federal minimum wage yesterday, as he embraced Democratic calls to boost it by $2.10, to $7.25 an hour, over two years.

[...]

Across the country, about 1.9 million workers earn the minimum wage or less, and economists estimate that 14.9 million other workers would benefit from an increase in the standard. When adjusted for inflation, the buying power of the minimum wage has dwindled to its lowest level since 1955, and raising the rate has become a popular issue among voters.

To say that the minimum wage increase is necessary is an understatement. Working a typical 40 hour per week job at minimum wage for 50 weeks out of the year grosses a staggering $10,300 per year annual salary, just barely above the poverty line and certainly not enough to live off of. Opponents of minimum wage increases cite the fact that the majority of minimum wage workers are part-time or teenagers. They often neglect the fact, however, that it still leaves a healthy percentage of minimum wage workers who do not fit into that category, and an increased minimum wage would greatly benefit those people.

The other source of bulk criticism against the minimum wage is that it hurts small businesses operating on a narrow profit margin, and effectively decreases the number of total jobs because jobs will be cut when employers can no longer afford the same number of employees at the new wage. However, increased data on the subject refute that point, possibly since lower income workers put a significant portion of their salaries directly back into the economy, so the resultant economic stimulation offsets whatever losses are felt by the increase burder on employers.

All of which is academic, of course, if the wage increase doesn't actually get passed. And while Bush is seemingly on board, he's linking it to yet another tax break.

The president's backing greatly enhances the prospects for congressional approval next year of the first hike in the federal minimum wage since 1997. He stressed, however, that it should be accompanied by tax breaks and regulatory relief that would cushion the blow for small businesses.

"I believe we should do it in a way that does not punish the millions of small businesses that are creating most of the new jobs in our country," Bush said during a news conference. "So I support pairing it with targeted tax and regulatory relief to help these small businesses stay competitive and to help keep our economy growing."

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Democrats have pledged to reinstate budget rules that would require that any tax cut be offset by equivalent tax increases or spending cuts. Some Democrats say they do not want to complicate their effort to raise the minimum wage by linking that issue to business tax breaks, as Bush and many Republicans are insisting. House Democrats will vote early next month on a stand-alone wage increase, leadership aides said.

Always the tax cuts. It's a shrewd political maneuver for Bush, as he comes off as being eminently reasonable by agreeing to meet the Democrats halfway on their plan to increase the minimum wage, all while keeping "small businesses" solvent through another tax break. However, if those tax cuts that supposedly target small businesses are implemented in the same way that previously styled cuts have been, the result doesn't really help them much at all.

One major benefit the President's tax cuts have supposedly offered small business owners is the reduction in the top individual income tax rate, from 39.6 percent to 35 percent. Because small business owners pay individual income tax on their business income, the Administration contends that they are disproportionate beneficiaries of the rate reduction.

But a Tax Policy Center analysis found that only 1.3 percent of filers with small business income are subject to the top income tax rate and so benefit from lowering it. Moreover, these households hardly conform to the popular image of the small business owner or the popular understanding of who most needs tax relief: their average income was $1.5 million in 2004.

Not exactly ma-and-pa's corner store.

The Democrats need to tread lightly if they're to be sure that they aren't being taken advantage of with Bush's newfound willingness to deal with them. He's made an effort to be as intransigent as possible when dealing with the opposition party throughout his term so far. While a change in disposition would be welcome, it shouldn't be taken at face value until confirmed to be what he says it is.

PRockGirlScout

Hawaii National Park, HI

October 2005

DEC 21, 2006 06:08 PM

Small businesses DO need tax relief. I say do away with payroll taxes altogether and make up for it by decreasing corporate welfare a little.