This exact debate is going on right now in the Ontario provincial election. The Liberal government is proposing $15 / hour minimum wage. The Conservatives are proposing a tax cut.
Some reporters have run the numbers and suggest that a minimum wage worker will come out farther ahead with the minimum wage increase than with a tax cut, in part because minimum wage earners already pay very low amounts of income tax.
Hypothetical question: If U.S. law were changed so that instead of being forced to buy U.S. Treasury Bonds with its surplus, the SSTF were forced to buy, say, Japanese Government Bonds or high-rated Eurodollar Bonds, would that change your analysis?
Yeah… jobs moving overseas or being filled with illegal workers or robots is a myth. :rolleyes:
Maybe you should have read all the way to the end of the post.
Regards,
Shodan
Re: using payroll taxes for a more granular pay schedule:
IIRC the max credit is about $6400. This would be for married filing jointly with three or more qualifying children. Phase-out starts around $24k.
If earning federal minimum wage, that’s about 3300 hours, or 1.6 FTE. The credit works out to be just shy of $2/h. Employee FICA/Medicare if earning $7.25/h is only 65 cents. $1.11 if you count the employer’s share.
So as things stand now, we couldn’t use an adjustment to FICA/Medicare withholdings to cover EITC in it’s entirety. Let alone if it were expanded. That doesn’t mean we couldn’t make other changes to make it work.
As always, don’t go believing my maths without double checking.
Also, decide whether you want to treat SocSec as being separate from the U.S. government with its own set of books, or to treat SocSec and USG together as a single fiscal entity. Either approach is acceptable. Confusion arises when you combine the two approaches, treating some parts of SocSec cash flow as if on one set of books, other parts as on the other books.
The erroneous argument in question makes no sense unless you’re combining SocSec and USG. But viewed that way, the way you’ve measured surplus/deficit doesn’t make sense. Unless you want to say that the Department of Defense is now in deficit by some $40 trillion. :eek:
Cite that the manufacturing jobs that went overseas were minimum wage? I thought the right wing line was that they went because unions forced the companies to raise wages too high.
The main problem I have is your proposal is that I don’t see why the taxpayer should subsidize employers to be able to pay workers relatively less. If they have a problem meeting a reasonable minimum wage, they should get more efficient. Even if that results in some very low level workers getting replaced, it improved the productivity of the economy as a whole, which is a plus.
Poor people don’t pay much in income taxes. If you earn $20,000 a year you only pay 5% of your gross income in federal income taxes. Aren’t you moving into subsidy territory soon if you do the EITC?
Let’s say we determine that a “living wage” is $15 an hour in a particular location. But then we discover that $12 is the highest it can go before there’s a negative effect on employment. Should we really consider it the employers fault if their employee simply can’t produce $15 worth of value per hour? Why should they have to take a loss? Isn’t that effectively a tax already? It seems sensible to me that the government step in and make up the difference.
Those things are happening. But they’ll still happen whether or not we increase the minimum wage. Now, exactly how much they’ll happen might depend on where the minimum wage is, but that doesn’t mean that we must never raise the minimum wage; it just means that we need to look at the numbers and decide whether it’s worth it.
Personally, I still favor just giving everyone (regardless of means) enough benefits to minimally live on (whether in UBI, or parceled out for healthcare, food, etc., or a combination), and then raising taxes as high as needed on earned income to pay for it. But that’s not going to happen in the US for a very long time.
At a lower rate than we’re creating new jobs. The current trend line has nonfarm payrolls topping 150 million before year-end.
Aside from vote getting it’s not worth it.
I agree and it’s a shame that this topic has no traction in the US.
The point being that it makes no economic sense not to combine SS and USG. Because again there’s only one source of funds, to either pay off the USG bonds held by SSA as ‘surplus’ or to fund SS directly if that fictitious ‘surplus’ were eliminated with the stroke of a pen (and correspondingly 'USG’s liability to the SSA): that source is the US public*. And ‘USG’, via the expressed will of the US electorate, can collect that money from the US public any way it wants to. SSA isn’t even a separate taxing entity like a US state. USG invented the ‘FICA’ tax as ‘separate’ and it can change that tomorrow just like it could erase the intra-government asset/liability. And the market in US govt bonds would not care a whit about either, assuming neither was perceived as signaling other policy changes.
The US public must pay back the ‘debt held by the public’, the official Fed term for gross US debt outstanding minus the portion held by other arms of the govt (mostly by the SSA). Maybe it would further clarify to add that this is actually how all serious analysis has looked at it all along. The US annual fiscal deficit is calculated as all revenue in, including FICA, and all spending out, including SS and Medicare. Which mirrors the fact that the cumulative US debt is counted (in serious non-political discussions) as the debt held by the public, not the gross debt. SS, DoD, National Park Service etc. are just different categories of spending, and that’s the way they have always been counted for serious non-political purposes.
So counting what is clearly one thing as one thing is not ‘erroneous’. Moreover the claim to count them as separate things generally breaks down just as soon as somebody measures the progressivity of the US federal tax system as that of the income tax. Then somebody will inevitably point out ‘but FICA is much less progressive’. Then it’s not separate anymore even if the same people just claimed a ‘SS surplus’. FICA should be counted in the overall progressivity…and there’s no surplus in any meaningful economic sense, sadly.
On foreign assets my example should have been clearer. If a small country doesn’t run a cumulative ‘general’ deficit, then funds its future public pension obligations by buying claims on foreigners (ie foreign assets), it has a real cumulative surplus. If another country funds a cumulative ‘general’ deficit with debt which is then bought by the pension agency of the same govt, it meaningless to refer to a ‘surplus’ in the pension agency. It’s a deficit to the extent of the total debt issued minus the portion bought by the pension arm, ie the ‘debt held by the public’ in US case. That’s the number that matters**, not the gross debt, nor the ‘surplus’ in SSA.
*essentially, discounting either tongue-in-cheek or serious cases where foreigners might pay money to the US govt, such cases can exist but generally negligible net.
**to the extent it matters how big the debt/deficit is which can be debated in degree but the issue here is measuring the deficit. It’s the net, and of no economic consequence if further broken into a bigger deficit and offsetting surplus within the same taxing entity.
We haven’t. It’s a fact.
If the Social Security Trust Fund needed to redeem their bonds, it would have absolutely no effect on anything whatsoever. The US Government is financing a trillion dollar deficit this year with bond sales, and they don’t even think they need to raise interest rates to attract investors. Every year every bond that the US creates is bought by someone. If the Trust Fund rolled $100 billion dollars next year, it would just be zeroed out by $100 billion in new bonds. New bonds that have a lower interest rate. It would actually be better. FICA taxes should be cut. We should have FICA brackets. There should be a floor, and no ceiling, just like with all other income taxes. And the Trust fund should have a statutory maximum. Anytime that the surplus drives the Trust Fund over the maximum, FICA tax rates should be cut. If the Federal Government was running a $3 trillion dollar surplus, we’d all demand a cut to income taxes.
You can make the same argument for any level of MW. My supermarket employs mentally challenged workers as baggers, which is great. I don’t know if they produce enough for the MW (they are not bad at the job) or they are subsidized, which is fine in this special case. So I do expect businesses to be able to pay what the MW is, assuming it is reasonable. Especially if their competitors can.
Also, remember while the MW is a bit better now it has fallen in real terms for quite some time, so there is room to raise it until it becomes unreasonable.
As an analogy, consider steel tariffs. Not the current set, but an older set. The traditional steel businesses used the tariffs to build profitability and didn’t improve their production processes, so they got further and further behind. Maybe if they hadn’t been so protected they would have improved productivity and been more competitive. Same goes for employers.
What you’re talking about is a universal income concept. The EITC phases out with higher income so violates one of the primary objectives of a universal income. Universal income also needs to provide a subsistance level of support without any preconditions (like working or even looking for work). Otherwise the market wages at the low end will never really rise the way it would with a minimum wage because you are forcing people into the labor market for really shitty wages because they need to eat.
I agree with the latter part of the definition but not the former. I see no reason why a universal income should not phase out at some income level, even if it is a very high one. A very broad-based phaseout would be functionally equivalent to raising taxes to pay for part of the program. An income cliff on the other hand would indeed be contrary to the spirit of a universal income, although some on this message board have advocated for it.
Benefit phase-out can also be accomplished by an adjustment to progressive tax brackets. E.g. you could give everyone $20k but make it a wash for me be increasing my taxes $20k.
I’ll note again that EITC is based heavily on household composition. So are official poverty measures. Some basic income schemes cover all citizens. Others just adults. There may be some strange incentives built into both.