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A Taxing Thought on the Minimum Wage
By Speed Gibson
July 14, 2017

You may remember how a Stillwater restaurant added a “minimum wage fee” to their tabs in 2014, in response to a 75 cent increase in the Minnesota minimum wage. Liberals, amazed that the owners didn’t just draw on their assumed millions stashed under the floorboards, said they should just raise prices if need be, not play politics. Conservatives like me cheered for a business willing to push back with what liberals hate most: the truth. And then I realized that there was a greater point being made here, intended or not. As an added, involuntary, cost to a business, the requirement to pay above market minimum wages is a tax.

Albert Einstein’s two great theories largely sprang from his ideas of equivalence. An astronaut in a rocket accelerating at 1 G in free space experiences the same effects as another still sitting on the launch pad on Earth. Gravity, he thought, must also be some form of acceleration, hence his General Theory of Relativity.

So, is there an equivalent tax to mandated minimum wages? Let’s take some full-time employees making $10 an hour. Assuming none are subsequently laid off, the new law takes effect and now they make $15 an hour. Each makes an additional $200 a week, or equivalently $200 a week now leaves the owner’s cash register. No additional work was performed. The money simply moved from the owner to the employee.

But a tax law could equivalently demand that the $200 “shortfall” be sent to St. Paul, then distributed to the employee via a refundable income tax credit based on the $400 paid and reported. Either way, the owner, employee and State checking account balances all read the same afterward.

I therefore conclude, if the minimum wage looks like a tax and acts like a tax and is compulsory like a tax – it’s a tax, with one remaining difference to now resolve: display that tax on the receipt like the courageous Stillwater restaurant owners did.

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