Economic illiteracy

John Pagani blogs:

When ministers sit around next year asking if they what policy they can tweak here and there to increase wages and reduce poverty, they should look at increasing the minimum wage and increasing union membership so that wages rise as the economy recovers.

There – fixed, and they didn’t need to spend a dollar in the stretched budget. In fact, people who earn more pay more tax, so it helps the budget.

Pagani has made the same mistake the Greens have made. They seem to think that money prints on trees.

If an increase in the minimum wage pushes wages up for those on the minimum wage by say $800 million, then yes at 12.5% tax that will be an extra $100 million of PAYE tax collected.

However those businesses will have their profits reduced by $400 million (as money does not grow on trees as the left always assumes) and at 28% company tax, that is $224 million less tax. Hence the Government has $124m less tax revenue overall. So rather than help the budget, it actually does the opposite.

Also ironic that Pagani thinks increasing union membership will help the budget. The only budget most of them help is the Labour Party’s. And at least one of them don’t even pay PAYE tax on behalf of their employees – preferring to spend it on political campaigns instead.