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Eliminate the Minimum Wage Subsidy to Big Business

Often people will decry tax breaks to certain businesses or industries on the grounds that this amounts to a “subsidy.” Of course it is false that letting people keep more of their money is a subsidy, but it is true that unequal tax rates (or breaks) can distort the market and benefit the more lightly-taxed business relative to more heavily-taxed ones. In any case, because of the distorting effect of tax breaks, various progressives and light-socialists label them subsidies and on this ground urge their abolition–i.e., to raise taxes on those taxed more lightly to equalize the tax burden (when the appropriate solution is to lower taxes on those more heavily taxed).

But if you go by the logic of the raise-taxes-by-closing-loopholes socialistic crowd, what about regulations that help big business by  disproportionately harming smaller companies? For example FDA regulations, patent law, pro-union legislation, environmental regulations, and the minimum wage. The costs of these socialistic regulations are more easily borne by larger companies than by smaller ones. Case in point, Walmart has pushed for a higher minimum wage. But Walmart already pays above minimum wage, so raising it would barely affect them. But it would impose costs on various Walmart competitors. So Walmart gets to advocate for what looks like social justice, while hobbling its competition. Clearly the minimum wage (and other regulations) is a subsidy to big business, following the logic of those who oppose tax loophole “subsidies,” and thus ought to be eradicated.

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{ 2 comments… add one }

  • Jordan Viray August 31, 2011, 3:34 pm

    Raise the minimum wage to support big business? Mindblowing. I guess I’m still habituated to the standard narrative but I’d definitely like to see the numbers to determine whether this is true before I add it to my toolbox of minimum-wage criticism.

    Walmart’s actions suggest your hypothesis is true but I’d rather say something like “wages represent x% of a small businesses net income on average but y% of a large business and a dollar increase from a baseline of $8/hr would have the following effects”

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