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Estate Tax Misinformation — and Even More Disparity

August 3rd, 2006

Kevin Drum, as usual, is on the minimum wage/estate tax story, and caught out the Washington Post in what might charitably be called an “error.” A writer for the paper quoted a businessman as saying, “Every closely held business in America today is either affected by the death tax or could be affected by it,” and did not question that “fact.”

Drum points out that the Congressional Budget Office estimated that a grand total of 485 small businesses are affected in any meaningful way by the estate tax as it is, and that the planned tax cuts would reduce that number to a total of 94 small businesses. A closer look at the above link in the paragraph shows a chart which demonstrates that with the estate tax as is, a grand total of 138 farmers and 164 family-owned businesses each year would be forced to liquidate because of estate taxes owed. This compared to the millions of American families living below the poverty line due to the minimum wage being what it is.

Drum also points out that while the Republican bill would also index the estate tax to inflation, it would not do the same for the minimum wage.

Update: Worse news still: the Republican bill not only would index estate tax exemptions to inflation while leaving minimum wage earners without such a net, but now it seems that the GOP-authored bill would actually cut the minimum wage for millions of workers nationwide.

There is a different minimum wage for workers who depend on tips. As a way to benefit businesses at the expense of workers, a special lower minimum wage is set for workers who receive gratuities; the current federal law says that tip earners can get paid as low as $2.13 an hour, as opposed to the $5.15 an hour minimum wage (meaning employers can pay workers virtually nothing, even if business is slow and tips are bad). Some states, like California, set a higher minimum wage for tip earners.

But the new GOP bill would, in one stroke, erase all the state laws that set special tip-earner minimum wages and reset them at the federal level. And that’s not an error in the wording of the bill, either–it’s something that the National Restaurant Association has been lobbying the GOP for. As if having to pay their workers close to nothing already isn’t enough.

The impact? A San Francisco waiter now making $6.75 plus tips would see their pay cut immediately to $2.13 plus tips–a pay cut of $4.62 an hour, at the same time that wealthy people get tax cuts in the millions. This pay cut will hit more than 600,000 workers in California alone.

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