The Minimum Wage, the Democrats, and Taxes

The minimum wage standoff came to an end a few days ago when the Republicans and the Democrats compromised on a bill that would include tax breaks to small business, but balance them out with closing loopholes and reducing exemptions on big business. In other words, the Democrats got the Republicans to agree to both increasing the minimum wage and making the tax system more progressive.

By and large, this is a good thing. The minimum wage is of greatest annoyance to small businesses, which often pay close to minimum wage and have low profit margins. Big business won’t even notice the change. Yahoo News explains the idea,

The rift stems from the new Democratic Congress’ approach to tax relief, which requires that every tax dollar lost to a new tax break be offset by a tax increase or closed loophole elsewhere. It also signals the new Democratic majority’s willingness to pay heed to the small business community even as it irritates larger corporate interests.

Better yet, the Democrats have successfully used the threat of stripping the bill of its tax breaks, which are absent from the House version, to make the Republicans stop complaining that the tax breaks are temporary while the loophole closures are permanent. The three-day-old Yahoo piece quotes business lobbyists as complaining about the compromise; the newer CNN piece quotes the Republicans as begging Democrats to stick to it.