SM Chamber Campaigns For Tax-Funded Wage Subsidies

Clara Sturak
Associate editor

   In response to the flurry of proposals for a living wage, and reports on proposals for a living wage, the Issues and Political Action Committee of the Santa Monica Chamber of Commerce has weighed in with its suggestion: local tax-funded wage subsidies for low-income workers.
   The concept of a local wage subsidy in Santa Monica first appeared in "An Economic Analysis of the Proposed Santa Monica Living Wage," authored by UCLA professor Rick Sander. The report was paid for by Santa Monicans for a Living Wage (SMLW), a group of hotel and business owners, who commissioned the study in response to the living wage proposal being studied by the City. In his study, Sander states that the federal Earned Income Tax Credit (EITC) is currently the "most significant federal initiative against poverty." Sander offers the opinion that a local EITC, administered by the City, would be a more effective way to raise the living standards of low-wage workers than a living wage ordinance which would set a minimum wage for workers in Santa Monica's Coastal Zone.
The Chamber of Commerce agrees. In a press release dated September 12, Issues PAC Chairman Tom Larmore states, "the chamber supports the need to help many low-income families in our society, but let's do it in a way that alleviates the symptoms without adverse side-effects." Pointing to studies (Sander's in particular) that show that the living wage ordinance would lead to business closures, lay-offs, and "replacement of unskilled workers by those with greater language abilities and more education and experience," Larmore urges the City to "be more creative in considering a variety of options to address the problem of the low-income worker." 
   Essentially, the Federal EITC is a tax credit given to workers with children who between than $13,000-$30,000 yearly (benefit levels are determined by family size, and money earned). This results in a taxpayer income subsidy of up to 40 percent of the worker's income. A local EITC would work on the same premise. Santa Monica taxpayers would foot the bill in order to boost the income of low-wage workers who live and/or work in the city. This solution appeals to business owners in that it takes the burden of a higher wage off of them, and places it onto the City, more specifically the city's taxpayers.
   In a letter addressed to members of the Santa Monica City Council, written in response to the economic study prepared for the City by professor Robert Pollin, Larmore states the Chamber's opinion that the a Local EITC would be the best way of addressing the "problem" of low-wage workers. In it he lays out the reasons why the Chamber supports a local EITC: it would not be limited to the Coastal Zone, it would not focus exclusively on employees of large businesses; and it would "target those workers requiring assistance to reach a higher level of family income [as opposed to teenage minimum-wage workers who are still be supported by their families]." 
   Larmore reiterates the Chamber's proposal that the City Council appoint a special bi-partisan commission, "consisting of representatives of labor, business, non-profit and other organizations," to look into this idea. Larmore feels the local EITC, or a variation on it, could be financed through "the use of existing tax revenue surpluses generated from local businesses or a possible increase in the hotel bed tax." In his estimate, the cost to the City would be approximately $2 million in tax dollars yearly, depending on the exact make-up of the subsidy.
   Although some states have implemented "piggy-back" EITCs, this would be the first time an EITC has been proposed on a local level.