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NewsFlash: January 31, 2007

Minimum Wage – Business Tax Cuts and Poverty

The Senate is expected to vote today or tomorrow on a bill combining a raise in the federal minimum wage to $7.25 an hour with a package of small business tax cuts. But the reality is these tax cuts, if enacted, will not offset any harm to businesses and could cost taxpayers in the long run.

In a new and timely issue brief, EPI economist  Max Sawicky disproves critics who say these tax cuts are needed to supposedly cover the cost of raising the minimum wage. Sawicky shows how a “one-size-fits-all” tax subsidy would be ineffective in curbing the business costs and job loss tax cut proponents claim come from a wage increase that could directly benefit 5.6 million people.

And in today’s EPI Snapshot, economic analyst  Liana Fox uses the recently released 2007 federal poverty guidelines to show how raising the minimum wage to $7.25 an hour can bring some working families closer to getting over the poverty line. Currently, a full-time minimum wage worker earns $10,712 a year, falling nearly 40% below the $17,170 poverty level for a family of three. But if the Senate bill were immediately passed, this gap would be reduced to 18% by 2009.

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