The underlying argument for a minimum wage increase is that America is a rich country and people who go out to work should gain a minimum standard of living by doing so. We can have lovely arguments about how minimum that standard should be, but that is still the base logic.
The argument in favor of there being a standard deduction is that people only start paying tax to run government and society once they’ve gained enough income to support a minimum standard of living. Again, we can argue about how minimum that should be, but it is still the base logic.
This raises a point I’ve been making in my native Britain for a decade now: Why are we taxing people who are making under this level we think is the minimum acceptable income? Or the same point another way, the standard deduction should be whatever we insist the minimum wage is. For either and both are that minimum standard we think people should be gaining.
Perhaps as a result of my pointing this out, the personal allowance (the British equivalent of the standard deduction) has more than doubled over this past decade. It’s now around and about what the full-year, full-time, minimum wage brings in. At least, it’s where the minimum wage used to be when politicians started to pledge to raise that allowance.
I regard the underlying logic as unassailable. Whether we call it the personal exemption or the standard deduction, it’s the addition of the two that give us the amount that can be earned before income tax starts. The argument being that this is some minimal amount to support life before anyone is asked to pay in for the more general costs of society. This amount stands at $12,000 this tax year, or equivalent to a full-time full-year minimum wage of $5.70 an hour. When we’re evaluating when you get to start paying the salaries of the bureaucrats, that’s the minimum you need.
We’ve also got that Fight for $15 movement. They’re arguing that the minimum wage, full-year, should bring in $31,200. I disagree, but so what? Let’s run with the logic of that claim. That’s the irreducible minimum that anyone should gain for their labor. Uncle Sam, presumably, shouldn’t be getting a share of that. But more, the argument is that this is just the minimum that someone should be getting in a country as rich as America.
OK, that means that the standard deduction should be $31,200 — that’s the minimum that someone deserves, right?
If there is a minimum amount that people should get, then it should be the same minimum amount whether we’re talking about what the Boss Class should pay them or what the other Boss Class should be deducting from their paychecks. If the minimum wage should be $15 an hour, then the standard deduction should be $31,200. If the deduction should be $12,000, then the minimum wage should be $5.70 an hour.
Despite the obvious logic of this, I think I’m right in saying I’m the only person in the country making this point. Which puzzles me, because the logic is obvious. If you want the poor to have more money, then the first and most obvious thing to do is stop taxing them so damn much.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
