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A tax decrease beats a government-imposed wage increase

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This year, Arizona’s minimum wage rose to $10.50 an hour. On the surface, this government-imposed increase may seem like a good idea for workers, but it will actually end up doing more harm than good.

As a small-business owner, I know firsthand the negative impact a mandated wage hike like that has on businesses, which are left with slimmer profit margins and fewer resources with which to hire more employees.

The Democratic talking point of employees earning a “living wage” seems altruistic, but the consequences speak for themselves. A $10.50 an hour minimum wage leaves employees vulnerable to staff cutbacks, reduced hours, and other cost-cutting measures. Just look at what happened to workers in Seattle when the hourly minimum wage jumped to $13 in 2016. According to a report released by the University of Washington, employees saw an estimated 9 percent reduction in hours. This equates to a loss of as much as $125 a month per job, a significant cut in take-home pay for low-income Americans. It can mean the difference between making rent or filling the gas tank each week.

Carlos Ruiz

Carlos Ruiz

Arizona’s minimum wage hike to $12 an hour over the next two years will impact thousands and thousands of employees, especially young people just starting out in their careers. And it will only increase the unemployment rate—the exact opposite of what we want in our state.

As a longtime job creator, it has been my experience that the best way to incentivize business owners to invest in their employees—and their business—is by lowering their tax burden, which is exactly what congressional Republicans accomplished with their recently passed Tax Cuts and Jobs Act. As the year progresses, more Arizonans will see an increase in their paycheck as a result of these tax cuts, as small business owners and other employers have more wiggle room with their finances. Whereas minimum wage hikes leave them with less wiggle room, tax savings have been proven to spur business expansion and job creation.

Larger paychecks spell a brighter future for Arizona’s economy. We’ve already seen employers here in Arizona and across the country give bonuses and implement wage hikes as a result of these savings. Walmart recently hiked starter wages to $11 an hour and dished out bonuses, benefitting 21,000 Arizonans. Some wage hikes are even reaching $15 an hour.

Consider the Western Alliance Bancorporation, which raised the base pay for many employees by 7.5 percent in addition to handing out increased bonuses and expanding maternity leave benefits after the tax bill passed. Moreover, Arizona Public Service requested a $119 million rate reduction for its customers as a result of federal tax cuts. We all pay bills, so it’s encouraging to feel a lighter load thanks to the tax overhaul.

In my own business, I will be using my tax savings to hire more people, buy new equipment, and run more shifts. I care about my employees and I want the best for them. I know that many small businesses in our state simply can’t afford to keep up with government-imposed wage hikes, and the first ones to suffer will be our employees themselves.

Tax cuts truly help workers and raise our standard of living, unlike Big Government.

— Carlos Ruiz is the owner of HT Metals in Tucson.

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The views expressed in guest commentaries are those of the author and are not the views of the Arizona Capitol Times.

3 comments

  1. The loss of $125 a month per job is a false statement.

    The Seattle employees’ pay increased from $11 per hour to $13 per hour, resulting in an 18% increase in hourly pay.

    The 9 percent reduction in hours for a full-time employee is between 3 and 4 hours per week.

    (40 hours per week) * ($11 per hour old wage) = $440.00
    (36 hours per week) * ($13 per hour new wage) = $468.00

    Therefore, even with the 9 percent reduction in work hours, employees still came out ahead and had higher earnings.

  2. bradley taylor hudson

    The comparison of raising minimum wage with tax is misguided. I understand Mr. Ruiz’ perspective as a small business owner looking at the current bottom line. While hard to swallow in the short term, wage hikes help working people in the long run. Our most prosperous years, for both workers and owners, were periods in which wages rose, driven of course by unions. Each time a union won a new wage level, outsiders complained about how much money union members made …. until their own wages also rose. …….. Tax cuts, at least the most recent set, are simply about the govt borrowing money that will eventually become the burden for the middle class on down. It is already starting, as some politicians are calling for cuts to Medicare and SS to help offset our debt. In this sense, “tax cuts” are great in the short term, but hurt working people in the long run …… the opposite of wage increases.

  3. Our economy is based on consumerism. Higher wages and low tax rates will put more money in the hands of the lower income workers who in turn will spend their funds on products and services. If the owners of the small business have more sales and lower taxes their business should eventually be more profitable. I don’t understand all this complaining by small business owners…they will also benefit from a growing economy. They should fear a rise in interest rates because then the cost of funds will eat into the profits, which could reduce hiring and net profits.

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