Cynics would say that the latest rise was an easy move for the Government to make. When the minimum wage rises by 50c, the Inland Revenue Department gets nearly 9c extra for every hour worked by a minimum- wage earner as the income tax liability increases. For workers with children, the Government’s Working for Families liability will decrease at the same time. All of this money will be funded by employers directly, and indirectly by the consumers who use the goods and services that those employers provide.
A number of people make this mistake. Putting up the minimum wage decreases the tax take for the Government. They have ignored the fact companies pay tax, and at a higher rate than individuals on the minimum wage.
A full time minimum wage of $13.75 an hour is $28,679 a year. Going to $14.25 an hour is $29,721. An increase of $1,042.
Tax on the former is $4,039 and the latter is $4,221. So an increase in tax of $189.
However the employer pays tax at 28%. Their profit will drop by $1,042 and hence the tax they pay drops by $292. That means a net reduction in tax to the Government of $103.
So a rather big fail for The Press editorial.Tags: editorials, minimum wage, The Press