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Understanding the arguments for and against employer excise taxes
Shifts the cost of supporting low-wage workers from taxpayers to the employers who profit from their labor.
Employers choose: raise wages or pay the tax. No mandates, just incentives.
Unlike minimum wage increases, tax measures can pass through budget reconciliation.
Higher wages mean more spending, which benefits businesses.
Henry Ford's 1914 Five Dollar Day made the business case for high wages.
If hiring a low-wage worker triggers a tax, employers may hire fewer workers.
The tax creates an incentive to pay living wages, not to eliminate jobs. If labor is needed, employers will hire. The question is whether taxpayers should subsidize that labor. Evidence from minimum wage research on job effects is genuinely mixed (see the CBO discussion below), and this design differs from a mandate: employers keep the option of paying the tax instead. The graduated structure also reduces any cliff effects.
Small businesses with thin margins may struggle more than large corporations.
The proposal exempts employers with fewer than 50 employees. In GAO's state-level data on working adults enrolled in Medicaid and SNAP, the employers at the top of every state's list are large corporations like Walmart, Amazon, and McDonald's, not small businesses.
CBO estimates minimum wage increases cause some job losses; this might too.
Economic research is mixed. The increased consumer spending from higher wages often creates more jobs than the direct effect eliminates. The graduated approach also softens the impact.
Living wages vary by location; a national standard may be too high for some areas.
The tax could be indexed to local living wage data, though this adds complexity. Alternatively, a national floor acknowledges that poverty exists everywhere.
Employers might cut hours or benefits to avoid the tax.
The tax is based on total taxpayer cost, not just wages. Reducing benefits actually increases eligibility for public assistance, maintaining or increasing the tax.
It's messed up that we need workarounds like this. We should just be able to raise the minimum wage.
I want to be clear: this proposal exists because of procedural gridlock, not because it's the ideal solution. A straightforward minimum wage increase would be simpler, cleaner, and more direct.
But "should" doesn't pass legislation. The filibuster exists. The parliamentarian has ruled. And meanwhile, 15 years pass without a wage increase while costs rise and workers struggle.
Sometimes you catch more flies with honey. But sometimes you need to find a different door.
The employer excise tax isn't a perfect solution. But it's an achievable one. And achievement matters more than purity when workers are waiting.
We can debate the ideal approach forever, or we can use the tools available to make progress now. This proposal uses the reconciliation process as intended, to enact fiscal policy with majority support.