Republican Ploy May Allow Vote On Minimum Wage genre: Econ-Recon & Polispeak & Six Degrees of Speculation

Empty pockets

It appears that Republican leaders in the House may allow a vote on increasing the minimum wage. However, as the final version of the bill is negotiated, it appears that Republicans may attach small business tax cuts to offset the increased costs. As I analyze the measure, it seems like an opportunity for Democrats to turn the tables on Republicans. I'll explain after excerpts from the article that can be found here.

Republican leaders haven't yet decided on how far to boost the federal minimum wage, now at $5.15 an hour, or which tax cuts will be included in the package, Madden said. Democrats and some Republicans are pushing to boost the wage to $7.25 over 30 months.

Republicans are under pressure to accept an increase pushed by Democrats as the November midterm elections loom and lawmakers prepare to accept a $3,300 automatic pay raise for themselves.

"We aren't quite there yet but we are getting very close,'' Republican Representative Sherwood Boehlert of New York said in an interview today. “If we don't deal with it, some people would argue it's going to hurt some Republicans,'' he said.

House Democratic leaders say the pairing of a wage increase with tax cuts threatens the prospects of the legislation, because many Democrats may not be willing to support further tax reductions that could yield a larger federal budget deficit.

Basically, the Republicans appear to be trying to back Democrats into a corner while allowing their own House members in tight races to vote in favor of the wage increase. If the bill were to fail because Democrats opposed added tax cuts, Republicans could neutralize the wage issue for the November election while providing needed cover for their House members.

If I were asked how the Democrats can turn the tables on the Republicans, I would argue they need to point out the hypocrisy evident in the GOP's tax cutting strategy. By giving small businesses tax cuts to offset the wage increase, they are actually enacting a subsidy that is ultimately funded through taxpayer generated revenues...in essence they are creating a new tax funded social program...even though they repeatedly espouse the need to cut back on such funding. The measure would ultimately becomes an added burden for the already struggling middle class while at the same time shielding corporations from sharing in the cost of the much needed wage increase.

As such, the proposed bill would continue the trend of fostering profits for the wealthy while shifting further burden for government funded programs to the average middle class taxpayer...who already pays a disproportionate share of the federal tax burden. The Democrats need to reframe the tax equation for the voters by pointing out that the total dollars needed to run the government have not actually been reduced...the burden for that funding is merely being shifted amongst the various income brackets...which is a tax increase…because it either takes more money from some income brackets or creates debt that has to eventually be repaid.

As the national debt increases, the economic growth needed to sustain the debt will eventually be eclipsed...leaving little choice but to collect more revenues...which will no doubt have to come from higher taxes. Until that point is reached, the government is subsidizing the wealthiest Americans while continuing to tax average citizens at virtually the same rates...what little reduction they may be receiving is likely offset by inflation, especially in the form of energy costs (which are creating record profits for large corporations).

The bottom line is that Republicans are not the Party of tax cuts...they are the Party that restructures tax burdens in order to provide added wealth to those who already posses the lions share of the wealth...while at the same time creating astronomical debt that will ultimately be apportioned to all Americans...a simple case of double dipping in my estimation.

Daniel DiRito | July 27, 2006 | 5:52 PM
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