Taxation Without Representation? The Political Economy of State Minimum Wage Levels
16 Pages Posted: 2 Jul 2014
Date Written: June 30, 2014
Minimum wage hikes express our sympathy for the working poor and our solidarity with them. But their importance is largely symbolic. The net effects of moderate increases in wage floors are vanishingly small. Statutory wage minimums work like taxes on labor, with their proceeds paid directly to low-wage workers and their costs shifted forward to consumers. Consequently, their distributional effects on the burden side are like those of sales taxes. Variations in state minimums appear to be driven in good measure by a combination of partisan political control and opportunities for burden shifting to nonresidents.
Keywords: Minimum wage, Tax shifting, Incidence, CBO, Partisan Control, Ideology
JEL Classification: D78, H22, H70, J38, J88, L38
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