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Debunking Rubio's Scare Tactics on Taxes and Minimum Wage

The Florida Senator's logic just doesn't add up. Then again, he's never run a business, so how would he know?


Florida Senator Marco Rubio gave a “Republican Response” to the President’s State of the Union address. He said that taxes cause employers to reduce hours or lay people off. Others say that raising the minimum wage will mean layoffs. Let’s take a closer look at that.

In Wednesday’s post,  What Do Republicans, Rubio And Rand Have If They Don’t Have Deficits? I focused on one line from Rubio’s speech,

One line of Rubio’s stands out: “Because more government raises taxes on employers who then pass the costs on to their employees through fewer hours, lower pay and even layoffs.”

With this Rubio is trying to scare people who are worried about jobs. Business taxes are on profits. Good businesses employ the right number of people, so a company that is making profits isn’t going to reduce staff or hours. That is simply preposterous to anyone who has ever run a business.

I was in a local CVS store today. There weren’t enough employees in the store, and there was a long line of people waiting to pay for items at the only checkout register. There was also a long line of people in line at the pharmacy. I saw a one person give up, leave their nearly-full carrier on a shelf, and just leave the store. I saw another person come in the door, take one look at the line and leave. I left without buying anything and went to a different store — not a CVS, for what I was looking for.

Was this CVS “saving money” by employing fewer people? Or were they being “penny-wise and pound-foolish” and costing themselves business today as well as in the future?

How many times have you seen this happen at a business that is not employing enough people to “save money?? You are at a business, they don’t have enough people working, and people give up and take their business somewhere else?

But there is more to it than that, because this misunderstands taxes. Taxes are not a “cost” as Rubio said. Taxes are on profits. A company pays taxes after all costs — including wages and salaries — are deducted from revenue. The fact of the company paying a tax at all means they have the right number of employees serving their customers and meeting demand so they make a profit.

It is the poorly-managed companies that employ too few people who are not going to do well enough to pay taxes. (I doubt very many companies are employing too many people. What are they doing, having them sit around reading the paper?)

Obviously being profitable — which means that they pay taxes — does not cause a business to lay people off or reduce hours. When Rubio says taxes make companies “pass the costs on to their employees through fewer hours, lower pay and even layoffs” he is just wrong.

Minimum Wage

The President’s proposal to increase the minimum age is also being discussed today, and the opponents are using a similar job-scare to fight it. They say that increasing the minimum wage will cause companies to lay people off or reduce hours.

On Marketplace today  they were talking to people working in a diner about the impact that raising the minimum wage would have. From the segment,  What the minimum wage means at work, (click through to listen to the whole segment)

At the Marmalade Café in El Segundo, Calif., employees like 32-year-old food runner Alejandro Serbin earn California’s $8 minimum wage, plus about $35 a day in shared tips.

Serbin, an immigrant from Mexico City, says a dollar raise would help. “It’s so much different for me. Because I have a family I have to support. The rent is high. I have to pay bills, insurance.”

Serbin and his wife, who works as a cook, have a 3-year-old and pay about $1,000 a month in rent, not unusual for Los Angeles. He’s hunting for a second job and says most of the minimum-wage workers he knows have two or even three jobs.

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