President Barack Obama’s push to increase the federal minimum wage from $7.25 to $10.10 an hour has given certain industries—and the CPAs who service them—pause, as they ponder the potential implications.

The president called for the hike during his State of the Union address in January and has since been making a concerted effort to gain support for the plan. By way of executive order, he has already raised the minimum wage for federal contractors to $10.10 an hour, which will take effect in 2015. He’s now urging Congress to extend that increase to all workers in the United States by passing the Fair Minimum Wage Act. Sponsored in the Senate by Sen. Tom Harkin (D- Iowa), and in the House by Rep. George Miller (D-Calif.), it would gradually raise the minimum wage over two years and index it to inflation. 

The White House has argued that the spending power of the federal minimum wage has decreased by one-third since the last increase in 2009, and said that, as it stands right now, families cannot live off what it provides, which is the equivalent of about $14,500 a year.

However, opponents have come out strongly against the measure, arguing that such an increase could damage the economy, as costs would increase for companies that hire minimum-wage workers, leading them to either cut down on staff, hire fewer people in the future or pass the extra costs on to consumers.

In examining the issue, the Congressional Budget Office (CBO) released a report on Feb. 18 that concluded that an increase in the federal minimum wage to $10.10 an hour would basically be good for the people who already have a minimum wage job, but bad for those who might be looking for one: It estimated that the raise would lift 900,000 people out of poverty (that is, raising their income above the poverty line) but would do so at the cost of 500,000 jobs (that is, employers would hire that many fewer workers by 2016).

Compounding matters is the fact that many businesses are still processing the changes that came with the passage and implementation of the Affordable Care Act (ACA), according to David J.  Wolfson, chair of the NYSSCPA’s Hospitality Industry Committee. Wolfson, who has multiple restaurants as clients, noted that the president is calling for a 26 percent increase from the current minimum wage, which, he said, was significant.

“A 26 percent increase? [Businesses] are going to have to either raise prices or not be open,” he said.

While he added that the big players in the restaurant industry can probably absorb the increase, smaller businesses may have a harder time—for example, he noted that one of his clients owns four Dunkin’ Donuts franchises and is even struggling to pay just the current minimum wage. Adding more expense to what he is already facing, Wolfson said, could force him to close at least some of his stores, as he may not be able to pass costs onto consumers, which would be the other option.

“Dunkin’ Corporate, which is public, won’t want [higher prices],” he said. “You can’t just raise your prices if you’re a franchisee—you do what the franchisor tells you to do, and if they say no price increases, that will directly impact bottom lines. The [franchisee] can’t raise prices, and it will be difficult to cut costs, so a 26 percent increase, especially when [wages are] a third of the business, could be too much to bear.”

William H. Jones, a former chair of the Taxation of Individuals Committee, however, was more sanguine about the minimum wage increase. “I think it’s a great idea,” he said. “I think it should be higher, but I’m happy with $10.10. It’s a start.”

Jones felt that people who work for minimum wages are generally in poverty and are probably also using food stamps, enrolling in Medicaid and receiving Section 8 vouchers, “which means the taxpayers are supplementing the payroll of private businesses.” Increasing the minimum wage, he said, would lift a number of people out of poverty, which would, in turn, decrease the usage of government programs. He added, too, that when people make more money, they tend to spend it, meaning that an increased minimum wage will allow money to quickly circulate through the economy.

Furthermore, he felt that the argument that businesses would lay off workers if the minimum wage increased was “total nonsense.” He believes that companies will, as they always have, hire the number of workers they think they need—no more, no less. McDonald’s, he said, does not want a situation where people have to wait 30 minutes on a line because the restaurant had to cut down to only one cashier and one fry cook. When asked about the aforementioned Dunkin’ Donuts franchisee, he said he still wasn’t convinced.

“They hire people because they need them, not because they want to help the local community,” he said. “And if corporate is worried about them, they can lower the royalty the franchisees pay to the parent corporation.”

Still, several NYSSCPA members shared Wolfson’s concerns about small business owners.

“The raising of the minimum wage to $ 10.10 is a good idea for the worker, but for businesses—especially small businesses like newsstands, retail stores, etc.—it will be a burden,” said Vincent J. Cosenza, the current chair of the Taxation of Individuals Committee.

Jack Vivinetto, chair of the Chief Financial Officers Committee, similarly pointed out that businesses are already working hard to incorporate aspects of the ACA into their current plans, and, as a result, changes to the minimum wage should be put on hold for the time being.

“Many organizations’ bottom lines were adversely affected recently by increased healthcare premiums and compliance issues as the result of the Affordable Care Act,” he said. “To add another layer of new cost, [with an] increase in the minimum wages from $7.25 to $10.10, will further erode the bottom line for many organizations that are unable to pass costs along to their customers and clients.”

For CPAs, increased costs could call for increased tax planning in order to recoup at least some of the expense. Wolfson said that there are a number of employment tax credits, though they tend to be specific to certain circumstances. He explained, for example, that one client of his takes advantage of hiring people in Enterprise Zones—areas in which special tax breaks are offered to businesses—though he added that this doesn’t really help those in New York City. He also indicated programs that give tax credits for hiring developmentally disabled people or former convicts, as well.

“There are some credits that I know my clients would look to, to try and [reduce costs], because the last thing neither my client nor myself wants is for the business to shut its doors,” Wolfson said.