WASHINGTON -- Many of the nation's poorest workers were looking forward to a modest pay hike on New Year's Day, when 10 states implemented higher minimum wages.
In the end, those workers' increased earnings may have lasted all of a few hours.
The deal approved by the House of Representatives late Tuesday to avert the so-called "fiscal cliff" did not include an extension of the payroll tax holiday, effectively hiking by 2 percent workers' payroll tax contributions which help pay for Social Security. For many minimum wage workers who are receiving a wage increase this year, the higher payroll tax will offset much or all of the potential gains they anticipated in the new year.
According to the Wall Street Journal's payroll tax calculator, a worker who makes $15,000 a year -- roughly the salary of a full-time, minimum-wage worker in most states -- will pay an additional $300 in payroll taxes this year under the deal struck by Congress and the White House.
That $300 is roughly equal to the additional earnings that minimum wage workers would have gained in most of the 10 states boosting their wage floors, according to an analysis of the increases by the National Employment Law Project (NELP), an advocacy group for low-wage workers.
In Arizona, for instance, the 15-cent wage hike to $7.80 translated into an annual raise of $320 for a worker maintaining a 40-hour week. In Colorado, the 14-cent raise to $7.78 meant an additional $310.
The higher payroll tax will wipe out the minimum wage gains and then some in Missouri and Vermont, where NELP projected additional earnings of $190 and $240, respectively, for full-time earners. Other states' minimum wage raises, including Florida, Montana, Ohio, Oregon, Rhode Island and Washington, ranged between 10 and 35 cents per hour, or $190 to $510 annually.
The federal minimum wage of $7.25 prevails in 31 states that do not have higher state minimum wages. Most of the raises this week in state minimum wages were due to cost-of-living adjustments, which tweak the minimum wage each year to account for inflation. (The federal rate has no such adjustment.) The 10 increases will directly benefit roughly 855,000 workers, according to the left-leaning Economic Policy Institute. Opponents of higher minimum wages, however, argue that many workers' wage gains will be offset by lost hours due to increased labor costs.
As HuffPost reported Tuesday, the end of the payroll tax holiday, which dropped the payroll tax from 6.2 to 4.2 percent, was among the least-discussed but perhaps most economically consequential elements of fiscal cliff negotiations.
First enacted in 2010 and later extended, the payroll tax holiday was meant to be a temporary stimulative measure. While lawmakers on both sides of the aisle expressed concern that extending the payroll tax cut further could threaten Social Security funding, many economists have warned against reducing workers' spending power in a still-weak economy.
Mark Zandi, the chief economist at Moody's Analytics, has estimated that the higher payroll tax for 2013 could reduce economic growth by more than half a percentage point.
Also on HuffPost:
House Speaker John Boehner (R-Ohio)
Commenting on Occupy Wall Street and the redistribution of wealth on ABC's "This Week" recently, <a href="http://abcnews.go.com/Politics/week-transcript-speaker-john-boehner/story?id=14892830&page=5#.TswHj3NPkqV" target="_hplink">House Speaker John Boehner said</a>: <blockquote>Come on. The top 1 percent pay 38 percent of the income taxes in America. You know, how much more do you want them to pay? Well, I'll tell you what: Let's take all the money that the rich have, all of it. It won't even put a dent in our current budget deficit, much less our debt.</blockquote>
Rep. Larry Bucshon (R-Ind.)
Rep. Larry Bucshon <a href="http://gcdailyworld.com/story/1786079.html" target="_hplink">said in an interview</a> with a local Indiana paper that the tax code needs to be simplified, and he invoked the Republican party line that the wealthiest Americans are creating jobs: <blockquote>I'm not for raising taxes on one sector of the economy. I think right now when you have a high unemployment and you raise taxes on the higher income earners, and they are not going to create any jobs. Arguing right now that the higher income earners aren't paying their fair share is not true. The data shows that. The top 1 percent of income earners are paying about 38 percent of the taxes. The top 10 percent are paying about 70 percent of the taxes.</blockquote>
Rep. Mike Kelly (R-Pa.)
During an House Education and the Workforce Committee markup, <a href="http://www.youtube.com/watch?v=CEArFmRDtrw&feature=youtu.be" target="_hplink">Rep. Mike Kelly made a plea</a> to "stop railing against the really wealthy": <blockquote>I've got to tell you something. As a guy who has had to pay his own way his whole life, I am greatly offended by the idea that somehow somebody in Washington knows how to spend my money better than I do. That somebody in Washington knows how to regulate me to the point where I can't even borrow money anymore. You want to talk about people who are afraid? The small banks. They're scared to death to do anything. Why? Because their government has such onerous regulations on them anymore that they don't know about the rules and the regulations that have been put through or haven't even been written. So when you want to sit back and talk about these wealthy, evil people ... you want them to spend money? Make their future certain.</blockquote>
Rep. Scott DesJarlais (R-Tenn.)
Commenting on President Barack Obama's proposed jobs bill in September, Rep. Scott DesJarlais also <a href="http://webcache.googleusercontent.com/search?q=cache:uHUJCTcKdokJ:www.wbir.com/rss/article/183289/2/TN-lawmakers-reaction-mixed-on-Obama-speech-+&cd=1&hl=en&ct=clnk&gl=us&client=firefox-a " target="_hplink">used the "job creators" line</a>. The congressman argued that wealthy Americans are "shouldering the burden" by "already paying the lion's share of taxes, and taxing them more is going to hurt jobs."
Rep. Blake Farenthold (R-Texas)
Two months ago, a handful of local Democrats protested outside Rep. Blake Farenthold's office in opposition to the proposed Buffett Rule Act, which would allow taxpayers to make donations with their income tax returns to help pay down the federal public debt. The bill was named after billionaire Warren Buffett, who has said he should be paying more in taxes. GOP lawmakers responded by suggesting wealthy Americans voluntarily donate extra money when they file their tax returns. "I think everybody is paying their fair share," <a href="http://www.kiiitv.com/story/15591779/local-democrats-stage-protest-on-congressman-farenthold" target="_hplink">Farenthold said</a>, adding, "And before we look at raising taxes on anybody, we've got to get the government spending under control. There's no point in pouring more money into something when it's hemorrhaging out the other end."
Rep. Ann Marie Buerkle (R-N.Y.)
In March, months before the Occupy Wall Street movement arose, Rep. Ann Marie Buerkle <a href="http://www.syracuse.com/news/index.ssf/2011/03/half_applaud_half_jeer_at_rep.html" target="_hplink">expressed sadness</a> at the class warfare in America. "The middle class is being screwed," said the congresswoman at a town hall meeting, but added that the wealthy aren't to blame. "Why do we have class warfare?" she said. "Why do we want to punish the rich? They worked hard for their money."
Rep. John Fleming (R-La.)
Rep. John Fleming made more than $6 million last year, according to the <em>Wall Street Journal</em>. In September on MSNBC, he <a href="http://www.rawstory.com/rawreplay/2011/09/tea-party-rep-only-400000-left-after-i-feed-my-family/" target="_hplink">used himself as an example</a> of why he opposes raising taxes on millionaires: <blockquote>The amount that I have to reinvest in my business and feed my family is more like $600,000 of that $6.3 million. And so by the time I feed my family, I have maybe $400,000 left over to invest in new locations, upgrade my locations, buy more equipment.</blockquote> MSNBC's Chris Jansing responded that the average American makes more like $40,000, $50,000 or $60,000 a year, to which Fleming responded: <blockquote>Again, class warfare never created a job. That's people that will not get jobs. This is all about creating jobs. It's not about attacking people who make certain incomes. You know, in this country most people feel that being successful in their businesses is a virtue, not a vice. And once we begin to identify it as a vice, this country is going down.</blockquote>
Rep. Dan Benishek (R-Mich.)
In August amidst the heated debate over raising the debt ceiling, Rep. Dan Benishek <a href="http://www.petoskeynews.com/news/pnr-benishek-delves-into-debt-ceiling-vote-federal-budget-during-forum-20110824,0,4643945.story" target="_hplink">addressed federal spending</a> at a public forum in Michigan. The congressman said that he would like to ease up on taxing corporations' foreign earnings and that he disagrees with raising taxes on oil companies. <blockquote>I think oil companies pay their fair share. I can understand where the oil company wants to deduct the cost of drilling a well. That's one of the tax breaks for oil companies, the subsidies. They get to deduct the cost of the well the year you drill.</blockquote>