Tax hike takes bite out of minimum wage gain

Evanston workers who've benefited from the city's decision not to opt out of the Cook County minimum wage increase will find a slice of their wage boost eaten up by the state's decison to raise its income tax.

Based on figures provided a local business by the payroll processing firm ADP, a worker who made the old $8.25 minimum wage had a take home pay of $6.49 an hour.

The new $10 minimum wage would have boosted that take-home pay to $7.78 an hour -- but the state tax hike trimmed $0.12 from the increase, leaving the worker with a new hourly take home pay of $7.66.

The state boosted its income tax rate from 3.75 percent to 4.95 percent as part of a deal to reach agreement on a new state budget after years of stalemate between lawmakers and Gov. Bruce Rauner.

Overall, what sounds like a $1.75 increase for workers nets out to just a $1.17 boost after taxes.

Meanwhile payroll taxes paid by employers increased along with the minimum wage boost. So the total cost of an hour's labor from a minimum wage worker for the employer has risen from $9.11 to $11.04.

Hecky Powell.

Evanston restaurant owner Hecky Powell, who two weeks ago said he feared he'd have to lay off at least three employees because of the minimum wage increase, today said he's been encouraged by the response from customers who are showing loyalty to his business.

"We had our best Fourth of July ever," Powell said. He added that he'll still have to raise prices to compensate for the higher labor costs, but if business remains strong, he may not have to cut his staff after all.

Powell said it's also helped that Skokie voted last week to not join many other suburbs in opting out of the wage hike -- because that means less price competition from restaurants just west of Evanston.

On the other hand, he said, officials from the Village of Wilmette, just north of Evanston, which did opt out of the wage hike, have called him to tell him about several vacant storefronts in their town that could become a new home for Hecky's if he wanted to relocate.

Powell said he's very unhappy with the limited communication county officials have had with business owners about the wage increase and a companion measure that requires businesses to provide paid sick leave.

That information gap may be addressed later this month when the Evanston Chamber of Commerce hosts a forum with the Cook County Commission on Human Rights, the agency that will enforce the two ordinances.

The session will be held at 6 p.m. on Thursday, July 27, in the auditorium at Rotary International, 1560 Sherman Ave.

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In inflation adjusted terms, the highest the federal minimum wage has ever been was in 1968 when it reached $1.60. In 2017 dollars, that would be $11.39.

Sources: CNN Money chart, Department of Labor table,  CPI calculator.

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Comments

The Value of a Minimum Wage

This is another good argument for raising the minimum wage—because the state needs more revenue and the tax increase wasn’t progressive, low wage workers would have suffered the most if they didn’t get this wage increase.


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