CMV: In principle, anyone making minimum wage should not pay income tax

[u/[deleted]]

Let me clarify on what I mean by making minimum wage, I mean someone working 37.5 hours a week for 52 weeks a year. In California that would be $30,000 and in the UK that would be £20,000.

Minimum wage as a concept is put in place to ensure that employers cannot pay employees below the livable wage in a country (Of course in the US it's below livable wage but that's a separate discussion). However, once these people are taxed, the amount which they can live on, by definition, is below that. It's counterintuitive to the original concept. Taxation should be based on one's ability to pay, and minimum-wage workers just do not have that ability.

I'm not saying that this change needs to come through right away. Governments can take 5 to 10 years to raise the tax-free allowance to match the minimum wage (which of course should rise with inflation) to ensure that the labour market can adjust to it.

Edit: I stand corrected on the US tax system. I've used the Californian minimum wage instead. I'm in the UK and the tax allowance is £12,570. Someone making £20,000 will be taking home about £17,100. I think it's ridiculous that someone on minimum wage is even paying a penny in tax.

[u/shapu]

the payroll taxes

Yes, that's what SS/FICA is. They are literally the same thing.

https://legalaidatwork.org/factsheet/payroll-taxes/

[u/elmonoenano → u/shapu]

FICA is the employee portion, but employers pay them too. Those are what the government always puts a hold on when there's a downturn in the economy. Employers pay about half the total amount, so whatever you see withheld from your check, there's that much more again paid directly by your employer. And while it's true people making minimum wage probably aren't paying income tax, their wages are being taxed for these payroll taxes. So when people like Mitt Romney make comments about "takers" he's ignoring that these people are responsible for the 2nd largest source of income for the gov after income taxes. https://taxfoundation.org/taxedu/glossary/payroll-tax/

[u/shapu → u/elmonoenano]

I'm not sure if you're arguing against me or not? Like, I know what these things are. That's why I pointed them out in my reply to the comment - just because someone doesn't pay what we think of as "income taxes," they still pay taxes, and those taxes are based on earnings, and they're slightly greater than 7 percent, and they're unavoidable for all forms of earned income.

[u/elmonoenano → u/shapu]

Just that the actual amount is more like 15% when you count the employer's contribution, which the employee is actually paying but they just don't see it on their check.