[Excerpt] This report updates information from CRS Report R43409, Federal Minimum Wage, Tax-Transfer Earnings Supplements, and Poverty. It provides illustrative examples of how families’ earnings at the minimum wage interact with the federal tax system (both federal payroll and income taxes) and Supplemental Nutrition Assistance Program (SNAP) benefits. The original report examined earnings, federal taxes, and SNAP benefits for families with a worker earning the current federal minimum wage ($7.25 per hour) and earning a proposed $10.10 per hour minimum wage. This report examines those wage levels and a proposed $15.00 per hour minimum wage based on tax and benefit rules in effect in 2016. Earnings and “net income” (after federal taxes and SNAP) are also examined in this report relative to the 2016 Federal Poverty Level (FPL).
The analysis examines wages, taxes, and benefits for four different types of families:
- A single person with no children;
- A childless couple;
- A single parent with two children; and
- A married couple with one child.
These family types are chosen to highlight the different treatment federal tax-transfer policies have on low-wage workers of different family types. They were not chosen as being representative of most minimum wage workers. The tables and figures below show the impact of policies on two childless workers—one married, one not. They also show the impact on two workers with children—one married, one not. (The married couples only have one worker.) The report highlights how policies differ between families with children and those without them. Additionally, the report assumes full-time work at the minimum wage all year, with work schedules and wage rates not changing for the entire year. These assumptions are not necessarily representative of minimum wage workers, many of whom do not work full-time or whose employment status and wage rates might change during the year.