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Unless you’ve been living under a rock these past few weeks, you have probably heard Obama grumbling about increasing the federal minimum wage to $10.10 per hour. He even created a clever tagline: “Ten, Ten…it’s easy to remember”. But what is the REAL importance of $10.10 per hour?
For my little example, I’ll choose California as it is my home state. Currently, someone making California’s minimum wage of $8.00 per hour at a full-time, 40 hour per week job, contributes the following per each hour worked:
1) $1.20 in federal income taxes
2) $0.196 in state income taxes
3) $0.496 to Social Security benefits
4) $0.116 to Medicare
5) $0.08 to the state’s disability fund (SDI)
This equates to $2.09 per hour in total contributions, meaning that my hypothetical employee is taking home $5.91.
Now, let’s bump my employee’s wage to $10.10 per hour:
1) $1.515 in federal income taxes
2) $0.54 in state income taxes
3) $0.623 in Social Security benefits
4) $0.146 to Medicare
5) $0.101 to SDI
Our new total: $2.929 per hour! My employee is now taking home $7.17 per hour, which means:
1) The government has increased their take by a whopping 40%
2) My employee has increased his/her take by a measly 21%
To add to this revenue, the government will also earn the following from the employer:
1) At $8 per hour:
2) At $10.10 per hour:
This means that the government is collecting an additional $0.16 (difference between what is paid at $8 v. what is paid at $10.10) per hour worked, ramping up their take by an additional 26%!
Now, I can already hear the argument being made by those on the left: “But the employee will get their income taxes back in the form of a refund, as the employee does not earn enough annual income to be liable for taxes!” That’s true, and I won’t dispute that! However, as many on the left point out in their push for a higher minimum wage, money in their pocket TODAY is what these people really need! Also, the fact that an income tax return will be provided is somewhat disingenuous as the government has already collected those taxes over the course of the year, and invested those dollars into interest-accruing accounts, meaning that the government is actually generating and pocketing revenue on principal that they will ultimately return to the employee. Also disingenuous is the fact that the government actually encourages people to spend their income tax return (and most people do) which, in turn, generates more revenue in the form of sales taxes.
So who REALLY benefits from a higher minimum wage? As you can clearly see, it’s definitely NOT the employee; it’s the government. And they’re pushing for this boondoggle in exchange for decreased employment, as reported by the CBO earlier this week, thus creating an even greater hardship on the employee for whom they claim to be trying to help! To boot, there is a lot more to this story that I won’t touch on here: everything from taxes collected on gasoline necessary for commuting to and from work, to the sales tax collected on maintaining one’s vehicle, right down to the various taxes and fees collected on public transportation, all have a negative impact on the how much the employee keeps per hour versus how much the government keeps. Suffice it to say, Uncle Obama and his pals in Congress are due to make out hugely, both in terms of scoring political points as well as generating a lot more revenue, all in the name of “protecting the worker”. Perhaps those House republicans opposed to a higher minimum wage, aren’t so evil after all?