EITC v Minimum Wage

Nathan Newman nathan.newman at yale.edu
Thu Oct 7 13:28:11 PDT 1999



> -----Original Message-----
> From: owner-lbo-talk at lists.panix.com
> [mailto:owner-lbo-talk at lists.panix.com]On Behalf Of Doug Henwood
> >
> >We decided to do a bigger EITC expansion in 1993 instead...
>
> Oh, so the government could subsidize employers rather than
> having them pay up?
>
> Doug

Aside from the advantages of the EITC over the mimimum wage - it helps part-time workers making more than the mimimum wage - mimimum wage legislation in practice usually ends up subsidizing employers more than the EITC. This is because in order to pass the minimum wage, new tax breaks for small business are usually attached to "off-set" expected employer losses.

Note today's AP:

October 7, 1999 Minimum Wage Hike Proposed Filed at 3:56 p.m. EDT By The Associated Press

WASHINGTON (AP) -- The minimum wage would rise $1 over three years and businesses would get $35 billion in tax cuts under bipartisan legislation circulating Thursday in the House.

Republicans and Democrats acknowledge that an increase in the $5.15-an-hour wage is all but inevitable, but many are looking for a way to offset the estimated $16 billion cost to businesses.

``It's about two dollars of tax relief for every dollar it's costing,'' said Rep. Rick Lazio, R-N.Y., who is part of a group drafting the measure. ``This approach provides relief to the businesses that are most likely to pay for the wage hike.''

--Nathan



More information about the lbo-talk mailing list