It is time to call the effort to raise the minimum wage what it really is — a clandestine tax increase placed not only on the shoulders of businesses and their customers who will have to pay for this increase, but also on the very individuals whom the increase is intended to help.
It has been reported that with this increase, minimum wage workers will be able to increase their spending on consumer goods thereby helping the economy. But what if they don't spend this windfall at Wal-Mart? What if they save it or pay off debts or invest it in their future or their children's future? Not to worry, the federal, state and local governments have this covered. If the sales tax revenue doesn't materialize, revenue from increased income taxes certainly will.
A single, 40-hour per week $7.25 minimum wage earner today in Maryland, for example, is expected to pay annually $733 and $508 in state and federal income taxes, respectively. At a minimum wage of $10.10 per hour, the tax burden increases to $1,205 state and $1,208 Federal. That is an overall $1,172 or 94 percent increase in taxes (64 percednt Maryland, 138 percent federal) on a 39 percent increase in wage.
In this example Maryland would get an extra $472 a year and the Feds an additional $700 from income taxes. What a deal! By comparison, to generate $472 in Maryland sales tax one would have to spend nearly $7,900 or about $2,000 more than the amount of the increase. With an estimated half-million workers getting this raise, the government can look forward to a big payday.
Legislators should not use minimum wage workers as a ploy for filling government coffers.