OP-ED | The Sub-$15-an-hour Tax: A ‘First’ We Don’t Need
Connecticut is the land of many firsts. Some are undoubtedly good: first state with a public library; first woman to be elected governor of a U.S. state “in her own right;” and the first to create a Freedom of Information Commission.
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More recently, our firsts have become increasingly dubious: first state government in New England to become addicted to casino gambling; first state in the nation to enact private-sector mandatory paid sick-day legislation; first to raise the minimum wage to $10.10 an hour by 2017. And we’re the only state in the nation that maintains a protection racket for liquor store owners.
Now we might have another first. Two committees in the General Assembly are considering bills that would fine large employers $1 per hour for each worker earning under $15 an hour.
The Office of Fiscal Analysis estimates that almost 150,000 of the approximately three-quarters of a million employees who work for companies with at least 500 employees would be covered under the bill. If all goes according to plan, the bill would result in a revenue gain to the state of more than $150 million in 2016 and double that in the out years.
The premise of the tax — because that’s what it really is, a tax — is that these low-wage employees often have to look to the state for food stamps and healthcare because their employers are too stingy to give them good benefits and pay them a living wage.
Forgive my cynicism, but this has all the makings of a money grab on the part of the state. With deficits of more than $2.5 billion over the next two years staring them in the face, lawmakers are scrambling to find new revenue. And after pushing through one of the largest tax increases in state history early in his first term, Gov. Dannel P. Malloy isn’t eager to be known once again as the tax man, especially so as he elbows others out of the way looking for a place on the national stage.
Why not just add a dollar to the minimum wage, or raise it to $15 an hour for all companies with 500 or more employees? The answer appears simple. The state wouldn’t get a piece of the action. The legislation under consideration would have the effect of punishing a big bad corporation (always popular), while providing additional funds for the state to pay its employees.
Speaking of state employees, public workers would be exempt from the new tax. That’s right. The largest employer in the state — the state itself — would not be burdened by this new fee.
So students working in the cafeteria at Northwestern Connecticut Community College, or young people helping out at a daycare center at WestConn would not trigger the tax. Nor, for that matter, would a low-wage worker serving the needs of lawmakers at the Capitol. Leave it to politicians to make laws for the bad guys and then promptly exempt themselves.
Another problem with these bills is they presuppose that every sub-$15-an-hour worker requires public assistance and that any employer with fewer than 500 employees can’t afford the fine, while every larger employer can. Have any of the lawmakers proposing this legislation ever met a payroll?
Even labor unions are skeptical of the idea of forcing employers to pay the fee. In a letter to the legislature’s Human Services Committee, the president of Local 371 of the United Food and Commercial Workers union, warned that the legislation could lead to “less profitability, increased prices and an adverse impact on future and present contract negotiations” for supermarket chains that have union shops. And surely it could have a similar effect in non-union companies like Walmart.
Translation: next time the service union representing Stop & Shop workers enters into collective bargaining talks with management, the Dutch company can rightly point to increased costs associated with the tax as a justification to limit wage and benefit increases for everyone else.
Finally, a recent report released by the National Employment Labor Project found that the state of Connecticut has another distinction: At about one-third, our state has the lowest proportion of sub-$15-an-hour workers in the nation (the national average being 42 percent).
“This is how we’re going to have a middle class in America,” said state Rep. Peter Tercyak, D-New Britain, who bristled predictably last week at the characterization of the proposed legislation as a “tax.” Tercyak did finally blurt out the truth at a rally this week when he conceded that, “This is very attractive income for the state.”
How would the sub-$15-an-hour tax help the middle class if it results in fewer jobs or if, as the unions suspect, the legislation has a depressing effect on wages?
The answer is that this idea is less an effort to help private-sector workers than it is a solution in search of some cover — a solution, in this case, to the real problem: insufficient revenues for pay for programs and state employees.
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