Minimum Wages Hikes Are Actually Tax Hikes

Economics / Wages Jun 13, 2015 - 02:07 PM GMT

The US federal minimum wage is getting a lot of attention these days. I have no doubt that the current $7.25 per hour minimum wage will be raised soon because american intellect has been diseased and destroyed by a Pelosi-like infestation of terminal ignorance. Americans are no longer capable of examining a problem fully to understand the correct solution. Sound bits, regardless of their relation to truth, have replaced logic.

Consider this. At the current minimum wage of $7.25 per hour, a 40-hour work week over 52 weeks of the year would gross about $15,000 federal reserve notes in wages. 2015 tax tables, with no deductions, would net the worker about 14,500 after about $500 in federal taxes are deducted. For a standard of comparison, that worker could purchase about 5,800 gallons of gasoline during the year at around the current price of $2.50 per gallon.

If minimum wages were raised as suggested by unions and other groups driven by profound ignorance to the proposed $15 per hour, that same worker would gross about $31,200 federal reserve notes per year. Using the same tax table, the worker would now pay about $2,700 in federal taxes per year for a net of about $28,500. How much gas will the $15 federal reserve notes per hour worker now be able to buy?

As anyone with a a single functioning brain cell knows, wages push inflation. Even an idiot like former fed-head Greenspan knows that. Double wages doubles inflation, more or less. So, now a gallon of gasoline goes from $2.50 per gallon to $5.00 per gallon. With the new raise, the worker can now by about 5,700 gallons of gasoline.

In this example, a doubling of the minimum wage would result in the worker being able to buy less gasoline than they could before the wage increase. Yes, this is theoretical as we all know tax rates can be changed and other factors can influence the actual price of gasoline. Increasing wages is not a zero sum game. Higher wages do not necessarily equate to a higher standard of living. As long as the FRB works to stoke inflation, living standards will continue to fall for the less-wealthy.

And, it’s not the fault of McDonald’s. It’s the fault of the FRB. Word to the workers. Stop protesting in front of restaurants. They are not responsible for the loss of purchasing power of the currency. The FRB is. Protest in front of their building!

The truth is the current regime favors minimum wage increases because wage increases result in more tax revenue for a hopelessly in debt gooberment. And, those tax revenue increases are imposed upon businesses that are forced to pay more in wages. Essentially, minimum wage increases are actually sneaky ways to increase tax revenue. The american public remains none the wiser.

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
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Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

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