The US should establish Progressive Wage Laws

Thanks to jifpop for inviting me to debate this topic. It's certainly innovative, nice to think outside of the box. Just to make this clear, we are arguing a policy that currently doesn't exist and hasn't been tried anywhere. As such, many of our arguments are likely going to be either unsourced (though those should be well-warranted), or sources that respond to systems with similar aspects in some way, though they are few and difficult to find. In order to simplify this debate and focus on the topic of a progressive wage rather than a minimum wage, I will not be defending status quo, but rather that the minimum wage should just be increased to $10.10. Both of our policies will be federal, but they will apply broadly to the states as well. I'll start on burdens. On a basic level, my burden in this debate is to showcase how a progressive wage is harmful, whereas Pro's burden is to support it. However, given the innovative nature of this proposal, the BOP is higher on Pro. A progressive wage has never been implemented here or anywhere, and as Pro doesn't suggest that we should have a trial period on a state level, we should be concerned with implementation across the country and its impacts. Untested policies such as this simply cannot be implemented unless the benefits far outweigh the harms, especially since this is going countrywide. As such, Pro has the BOP to prove that there are highly significant benefits to such a plan, and that the harms are insignificant or highly unlikely. So let's talk policy. This plan is somewhat similar to a progressive tax, where a person making more has to pay more in taxation, so much of the harms I'll be discussing mirror harms in that system. However, as these are on the level of corporations, the harms scenarios become much larger and more daunting. Let's talk subterfuge On a very basic level, companies are interested in reducing their bottom line. They don't want to pay more in costs than their competitors, and as such, will do what they can in order to reduce their tax burdens. This has led to any number of accounting schemes that shift their tax burden into, say, capital gains in order to avoid paying the majority of their usual taxes. Even with the hike last year, the number of ways to avoid paying those taxes has just gone up.[1] On the company level, with accountants carefully placing every number on their balance sheets, the number of methods is likely larger. Companies are using loopholes such as sending their finances offshore so often that the U.S. is losing $300 billion in tax revenues a year.[2] That problem is no simple one to fix either, since multilateral solutions are required. Despite anti-avoidance laws being crafted by individual nations, there's little they can do to stop these practices of offshoring.[3] Focusing more directly on Pro's plan, there are many places they could utilize to reduce the amount they have to pay their employees to the lowest level available. The employee factor (the Third Factor), wasn't clear to me when I saw it, but I've taken the time to read into it. It's essentially an opportunity factor, which means that companies are evaluated based on how many of those under their employment can improve how much they earn based on the work they do. One way to game this system is to focus on hiring independent contractors, who are paid by the task and therefore can have more changes to their pay structure more easily for a given company than changing an employees set number of hours or a set salary.[4] As such, this encourages more contract employment to avoid the costs. Note that the capital that would be assessed is solely liquid. Companies could easily offshore most of their liquid capital, or convert it into something illiquid, thereby avoiding these costs. More on that shortly. Income margins have created a number of issues with employees being paid under the table.[5] The process of payment to executives will just get more devious. Remember, Pro is not advocating any changes to the current taxation systems. As such, this system will be plagued by the same loopholes and concerns that the current one is. However, these are mainly just mitigation, reasons why they won't be paying out quite as much as they should. Why should we care as long as they're still paying out more than a small company? Because more harms come with these practices. These companies are going to start sending jobs overseas if they feel that that can affect the Third Factor and the benefits issue by reducing their overall employee count in the U.S. Even if they just hire here, they could easily try to game the system, ensuring that many opportunities exist for raising one's wages within the company, but that those opportunities are going to be as low as possible in order to avoid paying too much. Thus, raises for good work will happen, but they'll actually be much smaller than in status quo. I mentioned that companies will engage in duplicitous financial practices. So long as they're doing this, it's going to affect us in a broader context. Their taxation burdens will likely decrease, reducing U.S. tax revenue. What that leads to is uncertain, but we can expect effects on infrastructure and social programs, both of which are going to mainly harm the poor. Stock holders will be put into a more precarious situation as they will have even less basis for understanding and evaluating companies, especially since the propensity for lawsuits will likely increase as a result of IRS enforcement. These stock holders are less likely to invest due to the higher risk. And speaking on lawsuits, those are likely to increase dramatically. The IRS will sue more companies, many companies will sue the IRS to lower their minimum wage (since it's based on a variety of somewhat subjective factors), stock holders will sue companies for deceitful practices, employees will sue companies for that as well, and so on. This is a lot of money and time spent in civil courts, which means court clog as well, but more importantly, it's going to lead to massive scandals that cause major downswings in company earnings due to bad publicity. That harms employees too. Companies have shown a willingness to risk this before, they'll double down with this policy. The risk isn't just increased here. Companies are now directly incentivized to keep as little liquid capital on hand as possible. Whether it takes converting it to other resources or sending it overseas (as they have done in large part due to uncertainties over taxes [7]), this is going to disappear from their balance sheets, and as such their access to it will decline. Companies need liquid capital, especially in the absence of certain credit. They need it for acquisitions, tax changes, and any number of possible hits they could take.[7] Reducing this means that the impetus for mergers and acquisitions would be reduced, but more importantly, companies will simply be placed into high risk situations where they are entirely dependent upon foreign accounts and credit to survive major economic fluctuations. Future recessions and depressions will therefore bankrupt more companies/ I've run out of space, so I'll get to the rest of my arguments next round. For now, I hand the debate to Pro to build his case and rebut mine. 1. http://www.forbes.com... 2. http://rt.com... 3. http://www.economist.com... 4. http://www.tranlf.com... 5. http://www.irs.gov... 6. http://www.nytimes.com... 7. https://www.stlouisfed.org...