Raise wages to help cover higher tax
Raise wage to help cover higher tax
Gov. Tom Wolf and Republican legislative leaders appear committed to increasing the state government’s most regressive tax as the foundation of a long overdue budget agreement.
The plan to increase the sales tax by 21 percent across most of the state, from 6 percent to 7.25 percent, will most adversely affect people with the lowest incomes. (The tax would rise from 7 percent to 8.25 percent in Allegheny County and from 8 percent to 9.25 percent in Philadelphia.)
For now, the plan maintains sales tax exemptions on essentials such as clothing and some services. But to truly mitigate the tax’s impact on those who can least afford it, the Legislature also should increase the minimum wage.
Mr. Wolf has proposed increasing the state minimum wage from $7.25 an hour to $10.10 an hour in two annual steps.
Critics of that idea have cheered a state Independent Fiscal Office Analysis finding that the proposed minimum wage increase would decrease employment by about 31,000 jobs beginning in two years. They fail to note, however, that the same analysis finds that the higher minimum wage for more than 1.2 million other workers in the state would constitute a substantial net plus for the economy. Since low-income workers typically spend rather than save wage increases, the higher wage would create substantial economic demand that, over time, would create demand for more jobs.
Increasing the wages of the lowest-paid workers also would diminish state Medicaid spending by more than $200 million a year, according to the Keystone Research Center, a left-leaning Harrisburg think tank.
Pennsylvania already has the lowest minimum wage in the region. It is a doughnut-hole of depressed wages amid its surrounding states. In 2016, state hourly minimums nearby will be: Ohio, $8.10; Delaware, $8.25; New Jersey, $8.38; Maryland, $8.50; West Virginia, $8.75; and New York, $9.
The current course will leave Pennsylvania with the region’s lowest minimum wage and second-highest average sales tax, worsening its status as having one of the most regressive tax structures.
Lawmakers and the governor, who seem fixated on regressive taxation, must help low-income workers deal with it.