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For workers, even after deductions, an increase in the minimum wage provides two times the benefit of a tax cut.
Ottawa (19 April 2018) — This week 2 comparisons of the impact of the planned increase in the Ontario minimum wage and the Ontario Conservative proposal to cuts taxes for people earning minimum wage were released. Both came to the same conclusion. Workers are better off with a minimum wage increase than with a tax credit.
Minimum-wage increase means several hundred dollars more for low-paid workers
The planned increase in the Ontario minimum wage from $14/hour to $15/hour will mean a $2,080/year raise for workers earning minimum wage.
In contrast the Ontario Conservative proposal to cut taxes will provide workers with far less. The CBC comparison accepted the Conservative estimate of $859/year. However, as Sheila Block, a senior economist with the Canadian Centre for Policy Alternatives (CCPA) pointed out, existing credits mean that the average income tax paid by people earning minimum wage is roughly $703. That means that for workers, even after deductions, an increase in the minimum wage provides 2 times the benefit of a tax cut.
Tax cuts mean cuts to public services
The Conservatives have estimated that their plan to cut taxes will cost the province $500 million. That will mean less money for public services which will leave people earning minimum wage — and many others — worse off.
Most people would be better off if money for tax cuts was spent on public services
Research from the CCPA has shown that the value of the public services most people use is far, far greater than what they pay in taxes. In fact for people on minimum wage, the value of the public services they use is roughly 100% of their total income. Even for median-income households, the value of the public services they use is over 60% of their income.
Right now most people in Ontario — and in other provinces — want to see public services improved to make life more affordable. They want better funding for hospitals so people aren’t stuck in hallways waiting for treatment. They want improvements to prescription drug coverage and child care funding. They want improvements to transit to make it easier for people to avoid traffic congestion.
Higher minimum wage means better EI and CPP coverage
Another way workers benefit from a higher minimum wage is that they receive more when it comes time to retire or if they have to go on EI. Both CPP and EI payments are based on the premiums people pay. While a higher minimum wage mean people are getting more deducted in premiums, it means they will be better off in the long term. With a tax cut, there is no improvement in CPP or EI benefits.
Conservative plan leaves workers earning close to minimum wage with nothing
All workers earning low wages benefit from a minimum wage increase. Employers paying close to the minimum wage generally increase wages to make it easier to retain staff. If the planned increase in the minimum wage is cancelled, that won’t happen.
Tax fairness needed
There is plenty that can be done to make the tax system fairer. But the focus needs to be on getting wealthy corporations and individuals to pay their fair share. A tax cut that leaves people earning minimum wage poorer than they would be with the planned increase in the minimum wage is not going to help.