Tax Reform and the Minimum Wage III

Secretary of State candidate Guillaume de Ramel helps advance a point I began making at the end of last week (h/t RI Future)...

I write today to strongly support legislation (2006 H 6718) that will incrementally increase the minimum wage in Rhode Island from $6.75 to $7.40 by January 1, 2007.

Your committee members and House and Senate leaders showed real leadership when you passed legislation last year that would have increased the minimum wage, affording hardworking Rhode Islanders the opportunity to earn more critically-needed dollars in each paycheck. Unfortunately, as we are both aware, Governor Carcieri turned his back on Rhode Island's workers and vetoed that measure. Now he is offering the General Assembly and these same hardworking Rhode Islanders a half-hearted compromise of increasing the minimum wage to $7.10 an hour.

Governor Carcieri's hollow election year compromise is not enough. All working Rhode Islanders should be able to afford life's basic necessities without compromise -- especially in this time of extraordinary home heating and utility costs. A $7.40 minimum wage is critical to that goal.

I submit that this response was entirely predictable. Whenever any fiscally reasonable politician (like Governor Carcieri) discusses some aspect of fiscal and economic policy as a standalone issue, he loses, unless there is a major crisis looming. No matter how much is proposed, Dems argue that even more on the one issue -- be it more regulation, higher taxes, or greater redistribution of wealth -- is necessary to fix the problems that are there. Or, to paraphrase Mr. de Ramel, "You want to raise the minimum wage? Well, you should want to raise it more!"

The result, as this case illustrates, is that the Governor gets limited political benefit from something like a minimum wage increase presented in isolation from the rest of his economic policies. His opponents join together to say the increase was not enough, that it would have been more had they been in office, and who cares about what other effects it might have.

The way for the Governor to overcome this dynamic is to clearly link taxation and regulation in his policymaking. Had Governor Carcieri established the connection between business taxation and the minimum wage as soon as the proposed wage increase was announced, he would have had a response ready for his detractors...

We can raise the minimum wage as high as you want, as long as additional costs being imposed on small and medium size businesses can be offset with a set of appropriate tax-cuts. Aren't you willing to cut back the money that the state takes in to help give more money to the people -- in terms of both an increased minimum wage and a smaller tax burden?