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Brandon Verdier
Speaker of words and wearer of suits.
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The Economic Efficacy of Minimum Wage as Legislation
The purpose of minimum wage legislation goes beyond the moral concerns of liberals and progressives (keeping people out of poverty and ensuring a decent living for everybody). It also has longstanding economic benefits that benefit every social class from the bottom to the top.
For the most part, the demand of labor is directly related consumer demand. Labor demand can be defined as the amount of labor necessary to satisfy consumer demand, or in practical terms: the number of jobs available. Consumer demand is the sum total of all supplies that economic participants in a given economy will purchase; because of this, consumer demand is necessarily constrained by the amount of money in the hands of consumers - a consumer who earns 25,000 a year can only have a consumer demand of up to 25,000 a year. To represent it mathematically:
Consumer Demand ≤ Consumer Wage
Consumer Demand = Labor Demand
Labor Demand ≤ Consumer Wage
In other words, given a constant wage, consumer demand and therefore labor demand will eventually peak and in order to increase the labor demand we must increase wages.
It is not necessarily beneficial to simply increase the overall amount of money in the system. We have to make sure that new money is targeted to cycle through the economy and increase demand. The more wealth someone has, the less of their money as a percentage they will spend. A consumer who earns 25,000 a year will generally spend 25,000 a year; a consumer who earns 10,000,000 a year is extremely unlikely to spend 10,000,000 a year - the point being that increasing the wages or earnings of millionaires does not always (nor is it generally likely to) lead to an increase in consumer demand, but increasing the wages of the poorest americans necessarily leads to an increase in consumer demand.
In conclusion: raising the wages of the poorest workers (minimum wage) directly increases consumer demand, which increases labor demand, which increases the number of jobs available. In practice when minimum wage legislation is strong we see a snowball effect of reduction of poverty and job creation.
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Nationwide & Statewide Tax Reform for Michigan
The tax system in place both at our federal level and our state level here in Michigan are need in of major reform in order to better suit the economic climate of the 21st century. Just as at the turn of the 20th century we moved from luxury and excise taxes towards income tax, it is time for us to move away from our current tax system into other forms of revenue. Let us start at the federal level and dig down from there.
At the federal level, taxes are not used to fund spending. Since we left the gold standard in the early 70s, we no longer require mineral backing of our currency and our currency system is now backed by the government itself. The federal government’s spending is not constrained by borrowing or taxing, rather it is constrained by the relationship between the amount of money it taxed and borrowed and the amount of inflation we are comfortable with as a nation. We can spend more money than we take in at the federal level, it simply results in more and more inflation the more we spend beyond that threshold. So when we are talking about taxes at the federal level, we are not using those taxes as a tool for funding, we instead are using them as a tool to control wealth consolidation.
A few changes will be necessary here to achieve that goal and in order to determine what those changes need to be we have to look at the current economic climate and where wealth consolidation lies. I recently had this discussion with a friend of mine who had a few really good ideas about the kinds of policies our federal representatives should be putting forward. Right now in America the majority of wealth consolidation lies with hedge fund managers, large business shareholders, other forms of capital gains, and land monopolies. These categories aside, income in and of itself is not the cause of wealth consolidation - so we can actually abolish the federal personal income tax entirely. So what do we replace this tax with?
The foremost thing we should be implementing federally is a progressive capital gains tax, and alongside this, a progressive land value tax. These two taxes capture the majority of wealth consolidation and have the added benefit of not being avoidable by means of moving earnings over to tax havens since stock investments and land all exist within the country and cannot be outsourced. Implementing them in a steep progressive nature in such a manner that no one earning less than 50,000 a year from capital gains and no one whose land is simply the small plot of land their house sits on will be taxed but simultaneously taxes billionaire hedge fund managers, venture capitalists, and land speculators will pay enough that their wealth does not consolidate to unsustainable levels will be the most effective way to maintain control over the rampant income inequality in America. The only income tax we should maintain at the federal level is the business income tax, and realistically only on businesses earning more than 1,000,000 a year. This keeps local mom and pop businesses out of the mess of federal income taxes and also allows us to keep private businesses such as Koch Industries in check from earning billions untaxed.
The actual numbers would have to be figured from analysis with top level economists, but again the figures and tax brackets should reflect values that do not tax anyone earning less than around 50,000 a year personally via capital gains and businesses that bring in less than 1,000,000 or so a year. This way, only incomes that actually run risk of consolidating will actually be prevented from doing so, and most citizens will not actually pay any federal tax unless they own land.
Now we shall move down to Michigan, which currently implements property taxes, a 4.25% flat income tax, and a 6% sales tax. I love the state of Michigan, but this tax system is by and large one of my least favorite things about living here and we need to completely reset the system from the ground up.
First of all, given that the federal reforms we have discussed have already been implemented, we will repeal the property tax entirely. If it hasn’t, replace the property tax with the previously described land value tax. This will require appraisals of the land value as opposed to the developed land value, but otherwise should be a fairly smooth transition and should provide an overall easement of tax burden on residents who don’t own large plots of prime land while staying revenue neutral given that we fortify the burden on the large businesses that own large lots of prime land.
After that, we must reform the sales and income taxes into a tax system that does not remove money from the market. Our current tax system removes vast amounts of revenue from the market in Michigan and our economy is suffering as a result. We can abolish the sales tax entirely and reform the income tax into a progressive tax system that keeps Michigan either revenue neutral or increases revenue while also increasing the amount of money that remains in our private sector. Sales taxes and flat income taxes affect the poorest Michiganders the most as they spend almost all of their earnings but rich people are generally able and willing to simply save most of their money. Ideally, we should be taxing the money that would have been saved, not spent. That way, the money still gets spent and businesses see an increase in revenue and will be able to grow and employ more residents. Similar to our federal system, the Michigan income tax system should be reformed in such a way that citizens earning less than 50,000 a year do not pay income tax. Again, the actual figures would require analysis from economists, but the tentative figures I have been playing around with are:
$0 - $50,000: 0%
$50,001 - $250,000: 7%
$250,001 - inf: 17%
I am just an armchair economist and as such I am no way qualified to professionally and confidently posit that these figures we will be effective, but the math I have ran myself with these brackets both increases state revenue and increases the amount of money spent at businesses in the private sector, and it does so by taxing where it counts: money that would have been saved, not money that would have been spent.
These reforms are effective means to efficiently tax our citizens and businesses in such a way that prevents wealth consolidation at the federal level and allows for adequate funding at the state level without harming the private sector. In our current economic climate, I believe that these are the most effective and efficient methods of taxation that we could employ.
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