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A Fish is Not a Fowl: Tax Credits and the Minimum Wage

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Abstract:

Critics of the minimum wage sometimes suggest tax credits as an alternative means to increase the income of lowwage earners. While there is a case for tax credits (Batchelder, Goldberg, and Orszag 2006; Sawicky 2006a), they work much differently than a wage floor, and any change in tax credits must confront the problem of how the change would fit into the existing tax system and its array of credits, deductions, and exclusions. This paper pinpoints some problems entailed in substituting a tax credit for a minimum wage increase.