Tags: Forbes | Dorfman | Minimum | Wage

Forbes' Dorfman: Minimum Wage Hike a Bad Deal for Poor

By    |   Sunday, 06 Apr 2014 06:04 PM

Proposals to hike the federal minimum wage are intended to help low-income Americans. But the poor would actually face a higher effective tax rate than the wealthy 1 percenters if such a measure was enacted, according to Forbes columnist Jeffrey Dorfman.

Dorfman, a University of Georgia economist, says that hiking the minimum wage would actually benefit the federal government more than it would the poor.

According to his analysis, a hypothetical single mom with one child would see more than half of the proposed minimum wage increase offset by a reduction in benefits from the federal government and increased taxes.

Editor's Note: These 38 Investments Have a 96% Win Rate

“For those actually in or near poverty... any gain in wage earnings causes a significant loss in benefits that severely curtails the claimed impact of a minimum wage increase at lifting the working poor out of poverty. Essentially, these workers face the equivalent of a 50 percent or higher tax rate,” Dorfman wrote.

Dorfman noted the non-partisan Congressional Budget Office has concluded that raising the federal minimum wage would have minimal impact in helping low-income Americans, and that raising the Earned Income Tax Credit for the poor would be a much better tool to help them.

However, he said President Obama continues to support a higher minimum wage in the face of that evidence.

“Many, including me, suspect his preference for a minimum wage increase has more to do with the many union contracts that include automatic raises or renegotiations tied to the minimum wage.”

A recent Wall Street Journal article detailed why organized labor is so enthusiastic about a higher federal minimum wage, although most union workers already are paid more than the proposed new minimum.

A CNN Money analysis showed it takes $389,000 in adjusted gross income to be part of the top 1 percent among Americans. Those at the top pay 35 percent of all U.S. income taxes, and pay an effective tax rate of 23.5 percent.

Real Clear Markets estimated that raising the federal minimum wage to $10.10 per hour, as President Obama has suggested, would actually be harmful in low-cost rural areas of the country where the prevailing cost of living is much lower than in many urban areas.

In such low-cost areas, the economy would suffer and jobs would be lost, Real Clear Markets suggested. “Employers in Pueblo (Colo.) can't simply raise prices to pay for a 40 percent increase in the minimum wage to $10.10 per hour, since their customers — who also live in a low-cost, low-wage area — don't have the incomes to pay it.”

Editor's Note: These 38 Investments Have a 96% Win Rate

Related Articles:

© 2017 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Economy
The poor would actually face a higher effective tax rate than the rich 1 percenters if the proposed mininum-wage hike is enacted, according to Forbes columnist Jeffrey Dorfman.
Forbes,Dorfman,Minimum,Wage
462
2014-04-06
Sunday, 06 Apr 2014 06:04 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved