Alternate Minimum Wage Proposal Suggests Punishing Business Is the Real Goal

Fans of raising the federal minimum wage to $15 an hour have come up with a workaround for the Senate Parliamentarian’s ruling Thursday that that cannot be included in the latest COVID-19 relief bill. Their proposal suggests that the current push for a minimum wage increase is as much about punishing corporations for being successful that it is about helping the working poor.

“’I’m exploring a tax penalty for mega-corporations that refuse to pay a living wage. This isn’t over,” Oregon Democrat Ron Wyden, chairman of the Senate Finance Committee, tweeted.

The minimum wage hike was rejected because, under the Senate’s budgetary rules, only things that directly impact federal revenue, like taxes or benefit payments, can be included. Changing the rules for what private businesses can pay workers doesn’t fit that. Wyden, a Democrat, and independent Vermont Senator Bernie Sanders, have tried to get around that by tying the minimum wage to additional taxes on businesses.

“My plan would impose a 5 percent penalty on a big corporations’ total payroll if any workers earn less than a certain amount. That penalty would increase over time,” Wyden said in a statement.

Three things stand out here. First, Wyden’s proposal does not define “big corporation.” How large is that? What is exactly is the cutoff point? He doesn’t say.

Second, Wyden doesn’t give an exact figure for what the “big corporations” are supposed to be paying their workers. Wyden says they’ll be penalized if the pay scales don’t reach “a certain amount.” Advocates of a $15 minimum wage have claimed, despite clear evidence to the contrary, that requiring all businesses to pay at least that will not harm the economy. So why doesn’t Wyden specify a $15 rate or its equivalent? Is he tacitly acknowledging that some businesses may not be able to pay that after all? Another possibility is that he thinks the rules could vary, allowing Congress to reward favored businesses and punish ones they don’t like.

Finally, and most importantly, Wyden does not talk about ensuring that more money goes into workers’ pockets. Yes, the proposal is a carrot-and-stick approach to get businesses to raise the wage, but there is no fallback to ensure workers get paid more if a corporation decides the tax penalty is less damaging to its bottom line than the higher wages. That could become the case, because, again, the proposal doesn’t specify what the corporation would have to pay in wages to avoid the tax penalty.

Wyden seems keen to pile additional penalties on companies though. “If a profitable mega corporation like Walmart fires a store’s security guard and replaces him with a contractor who makes far less, my proposal would still require that Walmart pays a penalty,” he said. In other words, the government would get more money, the company less, and the worker nothing.

The White House does not appear to be keen on the idea. Hopefully, Sens. Wyden and Sanders’s fellow lawmakers will see that this proposal does little to help workers and looks around for better ideas.