Politics

How Tax Reform Is Keeping Promise ‘Fight for $15’ Couldn’t

tax reformAs the union-backed “Fight for $15” movement has sought to enact mandatory minimum-wage increases in states and localities across the country, tax reform seems to have spurred wage growth using a different approach.

On the day President Donald Trump signed the sweeping tax-reform law, the New Jersey-based OceanFirst Financial Corp. issued a press release announcing “a commitment to increase the bank’s minimum hourly pay rate to $15.00 within 30 days of the enactment of the Tax Cuts and Jobs Act,” affecting 135 employees.

It’s one of 21 companies that have announced raising their base wage to $15 per hour because of tax reform, on a running list compiled by Americans for Tax Reform that currently shows more than 120 companies have announced raises or bonuses for employees.

Businesses large and small are taking the same action, citing tax reform as the reason, including some of OceanFirst’s much larger national competitors, such as Fifth Third Bancorp, with 13,500 employees, 3,000 of whom will benefit from the boost in base wage to $15, according to a company.

Others include BB&T with 27,000 employees; PNC Bank, with 47,500; U.S. Bancorp, with 60,000; and Wells Fargo, with more than 200,000. All raised their minimum wage to $15 per hour, and credited tax reform for the change.

It isn’t just banks. Connecticut-based insurance firm The Travelers announced that along with $1,000 bonuses for its 14,000 employees, “we have only a small number of U.S.-based employees making less than $15 an hour. We will increase their hourly wage to $15.”

While still early in the wake of enactment of the tax-reform law, the demonstrable results seem to be in stark contrast with the mandatory minimum-wage laws requiring a $15 wage.

After passing such a city ordinance, Seattle commissioned a study by the University of Washington, which found the cost to low-wage workers outweighed the benefits by a 3-1 ratio, and found that on average, low-wage workers would lose $125 per month in lost work hours, lost employment or lost job opportunities because of the law.

The National Bureau of Economic Research published the study.

“The problem with legislating a $15-per-hour wage is that if productivity is not up to $15 per hour, that person loses their job,” Americans for Tax Reform President Grover Norquist told The Daily Signal. “When you change the regulatory and tax policies, you expand the economy for workers, and productivity can expand for a greater reward.”

The results were predictable, said David Kreutzer, senior research fellow for labor markets and trade at The Heritage Foundation.

“What happens with tax cuts is that demand pulls wages up, and then you don’t have a problem with people losing jobs,” Kreutzer told The Daily Signal. “Without an increase in demand, people will lose their job, or typically don’t get hired. … The fight for $15 is unambitious and impossible. You can’t make people rich through mandates. We want an economy so strong that people can make $20 or $25 per hour because productivity is so strong.”

At the start of the new year, 18 states instituted a higher minimum wage, according to the National Conference of State Legislatures.

Of those, California and New York passed laws to eventually raise the minimum wage to $15 per hour by 2022 and 2020, respectively. Other states that approved increases to less than $15 were Arizona, Colorado, Hawaii, Maine, Michigan, Rhode Island, Vermont, and Washington.

The states of Alaska, Florida, Minnesota, Missouri, Montana, New Jersey, Ohio, and South Dakota automatically increased their minimum-wage rates based on the cost of living.

Americans for Tax Reform found that overall, at least 1 million Americans were benefiting from announced pay raises or bonuses as a result of tax reform, and the nonprofit organization thinks that it’s likely more than that, since many companies don’t make public announcements.

In most cases, companies didn’t specify how many of their employees would benefit from the minimum-wage hike.

Companies on Americans for Tax Reform’s list that announced raising the base wage to $15 per hour are, with number of overall employees listed, where announced:

  • American Savings Bank, 1,100 employees
  • Americollect, 250 employees
  • Aquesta Financial Holdings, 95 employees
  • Associated Bank
  • Bank of Hawaii, 2,074 employees
  • Bank of James
  • Bank of the Ozarks, 2,300 employees
  • Central Pacific Bank, 850 employees
  • Comerica Bank, 4,500 “non-officer” employees
  • First Hawaiian Bank, 2,264 employees
  • HarborOne Bank, 600 employees
  • INB Bank, 200 employees
  • Regions Financial Corp.
  • SunTrust Banks, 24,000 employees
  • Territorial Savings Bank, 247 employees

“We didn’t become a prosperous country because our Founding Fathers said, ‘Let’s pass a law to make everybody rich,’” Norquist said. “We became prosperous because they got out of the way to let people trade and invent. This is very helpful in getting out of the way so that more people will earn more than $15.”

A spokesman for the Fight for $15 organization did not respond to comment for this article. While it primarily advocates for laws, the organization doesn’t oppose companies voluntarily raising the wage, noting on its website Target raising the wage for employees as a “big win.”

The AFL-CIO, an umbrella organization for labor unions, supports laws to raise the minimum wage to $15 per hour, but opposed the tax reform law. An AFL-CIO spokesman did not respond to The Daily Signal’s request for comment.

The tax-reform law cut the corporate tax rate, previously the highest in the world among developed countries, from 35 percent to 21 percent, putting the U.S. on par with most other industrialized nations. The tax law also cut individual rates and eliminated some loopholes.

From - The Daily Signal - by Fred Lucas

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SARGE
3 years ago

Having been an employer for many years, well, almost all people beating the drum for 15 have no idea about making payroll. The stress of coming up with 20 or 50 or a hundred Grand a week to keep your help paid is absolutely crazy. And they want more and more. When you have employees, you have entire families depending on you. Now i have a guy asking for a job, and because its construction, they’re thinking 18 an hr, with no experience, no tools and not a clue. And your clients are whining not enough guys on the job. Gees, if 1-2 out of ten stick your lucky!
I believe if these instigators were responsible for paying big money for unqualified, underskilled help, they’d be wetting themselves. It’s so much easier to just keep you head down and your a $$ up, and your hand out.

Hank
3 years ago

If $7.50 gets a $7.50 (100%) raise, someone making $14.50 gets a $7.50 (51%) raise. Fair? Should everyone get a 100% raise? Politicians mandate the raise, but businesses take up the onus. Politicians seem benevolent; businesses become the demons for the ripple effect:
1) raising prices
2) laying people off
3) going bankrupt and defaulting on bank loans
4) getting absorbed by bigger companies (which have to lay people off for duplicity, and to pay for the absorption)
5) sell out to foreign investors.
Not to mention, the raise would push people into a higher tax bracket – so the Feds could get a cut of peoples raises. This is nothing new. It happened in the 70’s. It seems the only lesson we learned is how to bring down America without firing a shot.
Wouldn’t it make more sense to raise the poverty level? This of course means lost tax revenue, and the Federal government would have to:
1) lay Federal workers off
2) increase taxes on those people who would still be paying taxes
3) deepen the debt, (which weakens the dollar’s [consumer’s/taxpayer’s] purchasing power, which accelerates inflation. )
Or better yet – downsize the government, which would:
1) decrease the debt burden, which would strengthen the dollar, which would lower prices
2) allow a drop in business taxes, which would allow a drop in prices, which would make US companies more competitive, globally
3) which would increase business, production, which would increase demand for labor, (which would decrease unemployment), which would reverse America’s decline

Kim
3 years ago
Reply to  Hank

I’ll go for door #3: “Or better yet”.
The list of major corporations giving back to their employees what WOULD have gone to Washington, D.C., is growing, and this is how it works in a free society. Incentivize; don’t penalize. Leave it up to the private sector; get rid of mandates.
Right, Hank, the feds better get spending under control or else all these gains we’ve seen this past year will just be more food for the monster.

PaulE
3 years ago
Reply to  Kim

Spending restraint from both parties, with the exception of the House Freedom Caucus that actually cares about our mounting deficits and mindless spending on numerous worthless federal programs, is a dirty word. The RINO wing of the Republican Party is as spend happy as the Progressive Democrats.

As for the latest progressive policy disaster known as Fight for $15, my response to Sarge below highlights what happens when that policy gets implemented in the real world. The economic and societal damage caused by these ludicrous left wing policies ripple far beyond the immediate businesses and employees impacted.

If most Republican politicians around the country had any real world business experience, they would be able to articulate how these Democrat policies end up not only hurting those directly involved, but costing everyone more money from having to make up the lost tax revenue. When businesses that try to pass along this additional employee cost in the form of high prices and fail, these businesses will go bankrupt as many already have. These bankrupted businesses’ lost tax revenue to local and state government will have to made up by all the other taxpayers in the state. Same goes for taxpayers having to pick up the increased unemployment costs due to the former employees now being without jobs and relying on unemployment benefits.

Bill
3 years ago
Reply to  Hank

Hmmm… Less government translates into a stronger economic system? Yes! Yes! Remember government does not generate revenue it only consumes citizens’ and companies’ revenues. 1 in 6 Federal employees earn a 6 figure annual income (not counting their retirement benefits.) That translates into a lot of money being taken from citizens and companies. Tax change is only a starting catalyst. It must be followed by a shrinking government, reduced regulations, and Congressional term limits. Government is a cash consumer. Companies are cash creators.

SARGE
3 years ago

By the time $15 hr gets adopted across the country it won’t be enough to live on. They’re talking 2022-2024 for places to be up to $15 hr. Do you all realize that’s $30 grand a year. The people will have to start fighting for $20 an hr, immediately after finally getting the $15. And here comes the robots!! So people are making $120 a day, bagging french fries and groceries. At some point things are going to get crazy. Employers are going to makes less than the employees. That’s not going to be good. Ya got the tail wagging the dog.

PaulE
3 years ago
Reply to  SARGE

The sole purpose of the minimum wage was originally to get teenagers and low-skilled workers started on the economic ladder of success. It was merely the first rung on a ladder, that if people wanted to earn more, they would have to improve their skills and value to any employer. It was to instill a work ethic and desire for further economic success in young people. A starting point. Nothing more. The minimum wage was NEVER designed or intended to be “a living wage for a family of four”, as the leftist group Fight for $15 group tries to portray it. By the way, that is a smokescreen for what this anti-capitalistic group’s real agenda is.

If someone thinks that they are going to “make a decent living” as this group claims and also support a family over their lifetime with only minimum wage skills, they are in for a world of disappointment. Not and have an actual job to go to, as employers will, and in many cases where this liberal nonsense has already been enacted, have already started cutting back hours, cutting staff or installing automation to handle the activity of people that have effectively priced themselves out of the job market. The cost of an employee is not simply the hourly wage they earn, but also the various taxes and any benefits, like employer provided insurance to name just one, that the employer has to pay.

The alternative, as this group claims, is just for the businesses to hike their prices to cover the additional cost. To just pass the additional cost onto the customer, who is supposed to just happily dole out an extra couple of bucks for a cup of coffee or any extra $5 dollars for a fast food hamburger. However, that has been shown to be a non-starter in virtually all cases, as customers will not over-pay for a product or service. Businesses going this route typically end up going bankrupt and closing. Thus increasing unemployment, damaging the local economy and costing local taxpayers more money as those bankrupt businesses are no longer helping to support the local and state governments that enacted this nonsense. The negative economic ripples from bad socialist policy, which this is one, touch more people than simply the former business owner and his now unemployed staff, but the left never wants to discuss this aspect of their social engineering policies. The market ultimately sets prices, not the government, as often as they try may this nonsense. Customers will seek an alternative source, at a cheaper price, or change their buying habits to what fits within their budget.

Labor has a value to a company just like any other asset. The more skills you bring to the table, the more valuable and better compensated you are to a company. Businesses exist to provide a product or a service that customers need or demand and are willing to pay for at a price that allows the company to not only cover all its capital costs and operating expenses, but also make a profit. All so the business can expand and serve the market better over time. What the Fight for $15 movement attempts to do is completely divorce the value of unskilled labor from the overall economic equation at businesses that employ low skilled workers. All Fight for $15 is doing is actually creating more unemployment for the least skilled workers they are claiming they are trying to help. Another Soros backed group doing its best to systematically undermine our economy and hurt the least skilled workers of our country, any which way they can.

SARGE
3 years ago
Reply to  PaulE

Good comment. There’s a lot of mid to older people working at the minimum wage. And most, for ever will be doing this. I’ve been paying wages for yrs in the construction business, but that’s more like the price of produce. Except when you’ve had to give people more than their worth. That sucks because its almost impossible to bring back. They get real bad attitudes. It’s easier just to lay them off. It’s so hard, because eventually the bus owners have to make $$

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