The Washington Post Sunday

Some Democrats explore taxing big firms not paying $15 an hour

- BY JEFF STEIN AND ERICA WERNER jeffrey.stein@washpost.com erica.werner@washpost.com

Senior Democratic lawmakers trying to find a backup plan to a minimum-wage increase are exploring new tax penalties on firms with more than $2.5 billion in gross receipts that do not pay at least $15 an hour, according to two people familiar with the matter.

The measure, which aides cautioned was still under discussion and subject to change, would aim to levy a 5 percent annual tax on these large corporatio­ns if they pay below $15 an hour, according to the two people, who spoke on the condition of anonymity to share details of private deliberati­ons. Democrats might aim to ratchet up the 5 percent penalty over time for large firms that do not increase their wages, although that measure is also preliminar­y and could change, the people said.

The plan being discussed would overwhelmi­ngly hit companies in the Fortune 1000, many of which have seen record profits during the pandemic. The penalty would probably start almost immediatel­y after the law is passed.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Senate Budget Committee Chairman Bernie Sanders (I-Vt.) called on Democrats to pursue these levies after the party was dealt a setback on its original plan to raise the minimum wage.

The Senate’s parliament­arian said Thursday that the $15-anhour minimum wage is inadmissib­le under the rules of the procedure Democrats are using to pass President Biden’s $1.9 trillion stimulus with a narrow majority. The White House has ruled out overruling the parliament­arian, and centrist Democrats such as Sen. Joe Manchin III (D-W.Va.) have said they would not change the rules of the filibuster in the Senate, imperiling the provision.

“It is cold comfort to know that majority support for raising the minimum wage could be meaningles­s because of arcane Senate rules,” Wyden said in a statement last week. “We couldn’t get in the front door or the back door, so we’ll try to go through the window.”

But the backup plan on the wage increase faces significan­t political and practical hurdles. Economists say administer­ing such a tax could prove complicate­d and create tax games in which corporatio­ns could avoid paying the penalties and raising worker pay. The vast majority of minimum-wage workers do not work at giant corporatio­ns. And it remained highly uncertain whether the rest of the congressio­nal Democratic caucus would go along with the plan being discussed by Wyden and Sanders. The White House has not yet taken a position on the measure.

“We just got that today and it’s a complicate­d piece of work. We’re going to have to look at that very carefully,” Jared Bernstein, a member of the White House Council of Economic Advisers, told MSNBC when asked about the plan Friday night.

The House included the $15an-hour minimum wage in the $1.9 trillion stimulus package it passed in the early morning hours of Saturday. House Speaker Nancy Pelosi (D-Calif.) and other senior Democrats, including White House officials, have vowed to find another vehicle for approving the minimum-wage increase during Biden’s administra­tion. Senate Majority Leader Charles E. Schumer (D-N.Y.) is also exploring the tax penalties idea, but has not formally endorsed it.

Wyden and Sanders prefer a federal $15-an-hour minimum but argued that the new plan is better than doing nothing for minimum-wage workers. But they do not have much time. Democrats agree that Biden must sign the bill into law before mid-March to prevent millions of Americans from losing unemployme­nt benefits. The Senate will also need time to debate and vote on the bill. That gives Wyden and Sanders only about one week at most to write the complicate­d new tax measure and sell it to the entire Democratic caucus.

Potential land mines abound. One major question is whether the franchises of large corporatio­ns would be subject to the penalty. The vast majority of McDonald’s chains, for instance, operate as franchises and could escape a tax penalty aimed at large corporatio­ns, said Arindrajit Dube, a professor of economics at the University of Massachuse­tts at Amherst.

Wyden has said his plan would include “safeguards” to prevent companies from either outsourcin­g or using contractor­s to avoid paying the $15-an-hour wage, although details remain sparse.

“At the end of the day, you’re going to be left with most minimum-wage workers in 21 states stuck at $7.25. … I think it’s going to be fairly modest in terms of impact,” Dube said. “It’d be a small sliver.”

Mark Weisbrot, co-director of the Center for Economic and Policy Research, a left-leaning think tank, said it would be “impossible” to monitor firms sufficient­ly to ensure they do not skirt the rules with subcontrac­tors or by other means.

“Anybody who wants to pay less than $15 under these alternativ­es will do it,” Weisbrot said. “So it’s not going to do the job . . . . Democrats should just overrule the Senate parliament­arian.”

Congressio­nal Republican­s have vowed to oppose the measure, with House Minority Leader Kevin McCarthy (R-Calif.) on Friday calling it “stupid.” Rep. Kevin Brady (Tex.), the ranking Republican on the House Ways and Means Committee, has said it would penalize firms for employing young and low-wage workers.

The pandemic has concentrat­ed attention on large employers who have not passed on profit to their employees. The Brookings Institutio­n, a center-left think tank, found in December that top retail companies’ profits soared by $17 billion compared with last year, or by 40 percent. The report also found that “with few exceptions” retail workers had seen only minimal gains as a result, with surveyed companies increasing wages by only 10 percent.

The United States has never gone longer without increasing its federal minimum wage in the eight decades since the law was passed.

“At most of the biggest retail companies in America, the gap between the struggles and sacrifices of low-wage frontline workers and the wealth they create for their employers and shareholde­rs is wider than ever,” the report said.

 ?? SALWAN GEORGES/THE WASHINGTON POST ?? Sen. Bernie Sanders (I-Vt.), chairman of the Budget Committee, supports levies on largely Fortune 1000 companies after Democrats were dealt a setback on its original plan to raise the minimum wage.
SALWAN GEORGES/THE WASHINGTON POST Sen. Bernie Sanders (I-Vt.), chairman of the Budget Committee, supports levies on largely Fortune 1000 companies after Democrats were dealt a setback on its original plan to raise the minimum wage.

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