Singer vs Baucus

While Jonathon Singer continues to hit the bell that the Senate is capitulating to business-sector backed GOP demands for 'gifts' or 'massive giveaways' tied to a minimum wage increase, I think it's important to actually examine what those incentives might include, and just how critical they to the minimum wage issue, and US tax revenue.

I've so far dug up a few documents from Sen. Baucus' website, which I'll include below, but a quick rundown shows items like the Work Opportunity Tax Credit, and other tax issues for small businesses covering deprecitation, deductions and record keeping.

Sen. Baucus' opening statement to the Finance Committee (PDF): ments/011007mb.pdf

Sen. Baucus' news release on the Work Opportunity Tax Credit (PDF): 007press/prb011007.pdf

Let's take a look at the WOTC, which is a specific piece of legislation to make permanant a currently existing tax credit for hiring disadvantaged workers.  This provides a 40% tax credit on wages up to $6000 (less for fewer hours worked); that's $2400 or less for hiring someone who receives some sort of public assistance or qualifies for other specific reasons.  

For the most part, it appears that this new hire would be someone who was not working previously, and therefore not contributing to tax revenues or their own retirement funds.  $6000 of salary about covers the new minimum wage for someone working half-time year-round.  The employers portion of Social Security and Medicare is about an additional $400 above that salary.  So a half-time hire would cost a company about $4000 out of pocket in salary and FICA once the tax credit was factored into the equation.

A second proposal, as noted in the press, would change the depriciation schedule for capital expeditures from 29 years to 15 years.  It does not change the amount of total deduction, which is still 100%.  It just changes how fast a business can write off the expenditure, about doubling the speed of the write-off.

I haven't yet found detailed info on proposals 3 & 4, but I'm looking.

Although not part of the minimum wage discussion, Sen. Baucus is also pushing a repeal of the Alternative Minimum Tax (AMT) which is sneaks up on more and more middle-income families every year.  While the ideas that making sure the wealthiest among us do not use deductions and loopholes to avoid paying the taxes they owe, the AMT system has not kept up with the times.  

AMT forces many people to do their taxes twice to see which system will apply to their specific situation.  Even minor fluxuations in income, especially related to securities trading and company sponsored benefits, can cause the AMT to kick in.

The AMT does need to be scrapped, but the original intent needs to be honored.  A new system should be instituted to prevent the overuse and/or abuse of deductions and loopholes.

The idea that Democrats neither need to offer nor should support any incentives to a minimum wage increase does have some validity, but I also believe it is not an iron clad point.  Some give and take is natural, and important.

Placing caps or limits on some of the incentives to make sure they benefit truely 'small' business might be useful; certain ranges of capital expenditures might get faster depreciation, or only companies of certain sizes would be eligible to hire certain numbers of workers to whom the WOTC would apply.

Tags: AMT, Baucus, bipartisan, compromise, minimum wage, Senate, tax credit (all tags)


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