Why Kansas City’s push to raise wages is a better strategy than Trump’s tax cuts for businesses

Kansas Citians who support higher wages for the poor and middle class must now keep their eyes on City Hall and Washington.

In October, the full Kansas City Council is expected to finally consider a proposal requiring companies doing business with the city to pay the $10 an hour minimum wage approved by voters.

For those who may have forgotten, voters in August overwhelmingly raised the wage above the current $7.70. It’s not in effect, though, because the Missouri legislature blocked Kansas City from setting its own minimum wage.

City Councilwoman Katheryn Shields thinks city vendors should pay the $10 anyway. She’s right.

She says local businesses don’t oppose her plan, which is good news.

On this issue, state government is wrong. Kansas City and St. Louis should be able to set the minimum wage without interference, and $10 an hour is a good place to start.

But the ongoing dispute over the minimum wage highlights a broader point. Opposing pay increases for the poorest workers is not only unfair; it’s also short-sighted and counterproductive.

Some business owners frantically fought to protect the $7.70 wage in Kansas City and St. Louis. They made the spurious argument that higher minimum wages actually cost jobs, citing a flawed Seattle study as an example.

Their job-creating alternative? Tax cuts.

The latest chapter in this troublesome argument came Wednesday, when Republicans offered a framework for federal tax reductions.

There was much to digest in the plan, but at least one proposal will sound familiar. Republicans want to reduce the taxes on pass-through income earned through LLCs and small corporations, from the current individual rate that tops out at nearly 40 percent, to 25 percent.

“Small businesses need meaningful reform that … allows them to invest in their business, create jobs, and grow the economy,” the National Federation of Independent Business said.

Kansans recognize the language. It’s the same argument Republicans made in 2012, when lawmakers eliminated state taxes on pass-through businesses’ income.

We now know that kind of tax cut doesn’t create many jobs. Employment in Kansas lagged behind other states that didn’t cut taxes.

Even The Wall Street Journal’s editorial page — no fan of taxes — said Tuesday that Kansas erred by “repealing the income tax for small businesses” in the tax package.

And we know why eliminating small business income taxes failed. Business owners, as is their right, put most of the cash in their own pockets.

The Trump plan doesn’t eliminate small business incomes taxes, but such a significant cut needs an explanation at a time when some families are still trying to get by on $7.70 an hour.

Here’s an idea: Link corporate tax reductions with actual job creation. Businesses that hire people get a tax break. Simple.

Growing the economy must start from the bottom up. That means lower payroll and income taxes for middle-income earners, and yes, higher wages. That extra cash will stimulate demand, and that will convince business leaders to expand and hire more people.

This story was originally published September 27, 2017 at 5:18 PM with the headline "Why Kansas City’s push to raise wages is a better strategy than Trump’s tax cuts for businesses."