Democratic leaders explore penalties on businesses paying below $15 an hour

Senate Majority Leader Chuck Schumer, D-N.Y., is exploring the idea of adding tax penalties for corporations that pay less than $15 an hour to President Joe Biden’s COVID-19 relief stimulus package, according to two congressional aides who spoke on the condition of anonymity to share private deliberations.

The plan represents a backup proposal to Democrats’ efforts to increase the federal minimum wage to $15 an hour, a provision the Senate’s parliamentarian ruled out on Thursday evening.

The parliamentarian said the minimum wage hike was not permissible under the rules of budget reconciliation, the procedure Democrats are using to pass Biden’s $1.9 trillion stimulus plan. But budget experts believe the tax penalties on corporations would likely be approved under the rules of that process.

After the parliamentarian’s ruling, Senate Finance Chair Ron Wyden, D-Ore., and Senate Budget Chair Bernie Sanders, I-Vt., called for adding the tax changes into the stimulus package after it is passed by the House. It is unclear how many Senate Democrats would support the backdoor approach.

White House National Economic Council Director Brian Deese said the administration will consult with congressional leaders on the best path forward about the minimum wage, in a Friday interview on CNBC.

With their narrow majority, Democrats could choose to overrule the Senate parliamentarian to pass the straight $15 an hour minimum wage hike. But White House Chief of Staff Ron Klain has ruled out that approach, as have centrist Senate Democrats.

Key questions about how the backup plan would work remain unsettled. In a statement, Wyden said his plan would impose a 5 percent penalty on the payrolls of “big corporations” if any workers earned below a “certain amount.” The statement did not define big corporations nor the level of the wages that would trigger the penalty. Wyden also called for tax credits equal to up to 25 percent of wages to small businesses that pay their workers higher wages. The penalties and credits would aim to encourage firms to adopt a higher wage floor.

House Speaker Nancy Pelosi, D-Calif., said Thursday night that the $15 an hour minimum wage will be included in the stimulus package, which is expected to be passed through the House as soon as Friday evening.

“While conversations are continuing, I believe this ‘plan B’ provides us a path to move forward and get this done through the reconciliation process,” Wyden said. “Workers have not gotten a federal pay raise in more than a decade. We can’t continue to have millions of workers – workers who are disproportionately, people of color, women and essential workers like fast food workers and home health aides – earning starvation wages.”

Congressional Republicans immediately panned the suggestion as a tax increase on small businesses. House Minority Leader Kevin McCarthy, R-Calif., called the idea “stupid.” Rep. Kevin Brady, R-Tex., the ranking Republican on the House Ways and Means Committee, said it would punish companies who hire for younger and low-income workers.”Makes no sense at all,” Brady said.

Meanwhile, other Democrats tried digging in to fight for the $15 an hour minimum wage. Rep. Pramila Japayal, D-Wash., chair of the Congressional Progressive Caucus, said she spoke to Sanders and supports including penalties and tax incentives. But she also said that Democrats should not give up on the $15 an hour minimum wage hike. She noted the Parliamentarian’s views were solely an “advisory opinion.”

“I don’t think we can go back to voters and say, ‘Look, I know … we promised it, but because of an unelected parliamentarian who gave us a ruling, we couldn’t do it.’ Nobody’s going to buy that,” Jayapal said. “Democrats are just going to have to make a choice about using, really going to the mat and really using every lever of power that we have to govern for the majority of the American people.”

Rep. Alexandria Ocasio-Cortez, D-N.Y., also told reporters that Democrats should be willing to consider abolishing the filibuster. “I don’t want to ignore the tax being a factor, I also know that a tax break is just not a replacement for a $15 minimum wage,” she told reporters.

G. William Hoagland, former staff director of the Senate Budget Committee, said the tax penalties would be very likely to survive the “Byrd rule” that prevented the wage hike from being included in the Senate bill.

“But it all depends on how CBO would score it on if it has a budgetary impact. I can see it as a tax – it would work,” Hoagland said.

Some economists expressed concern the backup plan would reach far fewer lower-wage workers than a flat increase in the minimum wage. Ernie Tedeschi, an economist who served in the Treasury Department, also expressed concern the provision could encourage outsourcing to cheaper labor abroad.

“I worry the marginal impact of focusing just on large corporations, while politically appealing, may make this less impactful,” Tedeschi said. “This is an interesting way to target the minimum wage to just the largest businesses, and the research has suggested larger businesses are better able to absorb the costs of a higher minimum wage. But this will not reach nearly as many people.”

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15 thoughts on “Democratic leaders explore penalties on businesses paying below $15 an hour

  1. Typical Democrats. If you can’t democratically convince others that this is a good idea – go to plan B – Punish and Cancel until you have complete control.

    Vs. letting the market decide what the going rate should be – based on the work provided and expertise involved. A minimum wage was never meant to be a living wage – rather its for part time unskilled workers, like students and stay at home parents. Raising the minimum wage will do two things: reduce the number of those unskilled jobs as employers will move more towards automation, and or raise the prices of the goods and services at those places that do pay an elevated minimum wage.

    We have a major totalitarian push going on in Washington DC. by Democrats. Its not good for the country at all!!

    1. Completely agree! The base cost for a full-time employee w/o any benefits will be around 31K per year. I imagine business owners will end up spending that on highly skilled workers to develop and/or further automate their business. This will ultimately worsen the divide…

  2. You have to wonder how many of those moronic dumbocrats have ever owned a business and signed the front of a paycheck, rather than the back of a welfare check.

    (Is that taps for The Golden Goose of entrepreneurship I hear playing in the background?)

  3. And whom do they think this will help? It will cost jobs and as it moves the “water level” up, in terms of inflation, the people that it is designed to help will see no actual improvement in their ability to purchase. I mean this is practically “kindergarten” level of knowledge as it relates to economics.

  4. While business’s like Costco, Amazon, Target and Walmart would be fine, I can only imagine all the business’s that would disappear like say, fast food. And don’t get me started on grocery stores. Grocery bills seem like they have doubled in the past year so I can only imagine what food would rise to. So much for a decent standard of living. Only the wealthy who are making these laws will not be affected because rising prices mean nothing to them.

  5. A few years ago, California raised its minimum wage to $13.00 an hour. As Michael J noted above, the first thing that happened was prices went up across the board. Next, people earning minimum wage, who overwhelmingly work in retail or food, got their hours cut, so not only were they no better off, they were worse off because of rising prices. Next, over time, as Don A wrote above, automation eliminated a lot of those jobs permanently.

    We came to Indiana two years ago from there and saw this first hand. One thing that amazed me upon arriving here was the number of companies advertising jobs at $12 an hour for entry level jobs, in a state where $7.25 is the legal minimum. In California on the other hand, at that time, people in retail and food who still had jobs found themselves making just the minimum, even if they had been making more than the old minimum beforehand.

    Unfortunately, you can’t just pass a law to eliminate poverty. Whether we like it or not, the market will determine wages. Either through voluntary arrangements, or by reducing the supply of low skilled jobs. That’s reality, something Democrats lost touch with a long time ago.

  6. Un Effin’ believable!!!
    Agree with everyone here (Unusual!)
    We KNOW how the left wants bigger controlling government. What are WE going to do to stop it? Love the forums and comments but GOTTA roll up the sleeves and do the work to get OUR country back. From the people I interact with, I don’t believe the divide is as professed as the MSM Tech oligarchs want us to believe?

  7. If this came to pass i wonder of the value of a persons total package is taken into account. Health care, paid vacation, sick days, paid holidays, etc. typical legislature from a group that for the most part never ran a business, never made a pay roll, was never the last guy paid.

  8. This is not the time or place to be raising any costs for businesses who have been mandated to shut down. Unlike the federal government we cannot print our own money to make up for lost revenue. Fortunately it does not affect my business. I have all seasoned employees, who are making more than $15.00 an hour. However it does affect any summer help that I might consider hiring a highschool or college student to do odd jobs.

    Cost of goods are going up, freight is at record highs, add higher wages and you may see inflation rates that we have not seen since the 1970s.