Twice the Burden: Low-Wage Employers Cost Taxpayers Billions in Public Assistance and Lost Tax Revenue

04/15/2015 05:57 pm ET | Updated Jun 15, 2015

On Tax Day, while working Americans contribute their part to keeping the country running, many companies that pay low-wages will exploit a loophole in the tax code that that allowed them to write off taxes on over $66 billion in executive compensation pay between 2007 and 2010.

The way the U.S. tax code is written now, performance-based bonuses and stock options for chief executives can be deducted from taxable corporate income. The more performance-based compensation the businesses pay to their executives each year, the less the companies owe in federal taxes.

That's why Democrats in Congress are trying a two-pronged approach to increase wages and boost the economy. There is now a bill in the works to raise the federal minimum wage to $12 per hour -- an increase that meets with the approval of an overwhelming number of Americans, including a majority of Republicans.

Democrats are also proposing to fix the tax code by ending tax giveaways for companies that don't increase wages for their rank-and-file workers. Instead of rewarding companies for giving millions of dollars in stock options to their CEOs, an updated tax code would encourage companies to pay their workers a livable wage.

Companies like McDonald's and Walmart rake in billions in profits each year and return nearly as much to their shareholders. Their employees, however, are paid so little that accepting charity or public assistance becomes vital to making ends meet. As a result, taxpayers subsidize these companies' low-pay practices to the tune of billions of dollars each year in low-income public programs.

In fact, low wages in the United States cost taxpayers a stunning $153 billion on average every year. Underpaid workers are forced to rely on public assistance programs like food stamps, Medicaid, the earned income tax credit and Children's Health Insurance Program to support themselves and their households, according to a report this week by the University of California Berkeley Labor Center.

That's why thousands of workers are joining together on April 15 to call for $15 an hour and the right to form a union. These workers -- including fast-food, home care, retail, child care, and airport workers and adjunct professors -- are the same people who turn to public assistance to make ends meet. They are striking at a time of record income inequality -- created in part because wages have stagnated for the last 30 years, and also because the tax code has shifted to benefit the wealthiest and burden the rest of us.

The day of strikes builds on growing momentum for higher wages nationwide. It is expected to be the largest mobilization by workers seeking higher pay in U.S. history. Launched just two years ago, the "Fight for $15" movement has helped set a new standard for wage increases in both the private and public sector. Recently,Aetna, First Green Bank, C1 Bank and Moo Cluck Moo all announced or began implementing minimum pay rates to levels that can make a difference in the lives of their workers. Cities and localities have also acted to substantially increase minimum wages. Seattle and San Francisco already began phasing in minimum wage rates of $15 earlier this year.

Responding to pressure from workers, companies like Walmart, McDonald's, Target, Gap, and others have raised wages -- though not by enough to cut into their workers' reliance on public assistance.

The thousands of workers who are striking on Tax Day are right to demand a greater share of the profits that corporations gain because of their labor. It's time to restore that fundamental promise of America that working hard will lead to a better life.