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The Republicans are pushing a tax bill that drew a veto message by president Clinton It is a 245 billion tax package that would tax labor The bill was approved by the House by a vote of 237 to 174 but the Senate will not vote on the bill until Friday The tax bill also contains a 1 boost in the federal minimum wage over the next two years which would raise the wage floor to 615 an hour The market for labor is very inelastic because people are going to work whether or not there is a tax Most people claim they would work full time regardless of wage Even if there is a tax people just cannot stop working because they need money So taxing labor is a good thing to tax if the tax is needed The article does not go into what the tax money is used for so we cannot say whether or not the tax is needed Assuming that the tax is needed labor would probably be the best thing to tax because there will be a small deadweight loss The 1 boost in the federal minimum wage included in the bill could actually hurt the bill in the process of becoming a law By raising the minimum wage you put a price floor on the labor market A price floor will force the price of labor above the equilibrium price This causes a labor surplus which means there will be unemployment There will be more people willing to work at this price but fewer people willing to pay this price for labor The equilibrium price would be the best way for the market to reach a perfect medium between the labor supply and the demand for labor By including this provision to the tax bill it could make it harder for the overall bill to passed There will be many people
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