Every few months Bernie Sanders goes to the well to find another bogeyman. The current villain has so captured the senator’s attention that Sanders named a piece of legislation after him: the “Stop Bad Employers by Zeroing Out Subsidies,” or Stop BEZOS. Jeff Bezos is, of course, the CEO of Amazon.
The bill would levy a special tax on large companies equal to 100 percent of the welfare benefits those companies’ workers receive from the government. Sanders’ intention is to force employers like Amazon to pay a “living wage” by having them reimburse the government for welfare benefits their workers receive.
An Apparent Huge Misunderstanding
This is the sort of bill only someone with virtually no understanding of economics would concoct. Sanders claims that thousands of Amazon workers rely on welfare to survive. Amazon counters that Sanders exaggerates by including part-time and temporary workers in his calculations. This dickering obscures what Sanders’ bill will actually do. It will make workers on welfare more expensive to employers, and it will make them more expensive in direct proportion to how much welfare they receive.
Connecting the dots, imposing a tax on businesses that hire poor workers will reduce the number of poor workers they hire.
What Sanders and all lawmakers should know is that as something becomes more expensive, people buy less of it. Sanders seems to understand this when it suits him. In 2015, he said that the way to reduce carbon pollution is to impose a tax on businesses that pollute. A year later, he said that the way to reduce stock market speculation is to impose a tax on people who speculate.
Connecting the dots, imposing a tax on businesses that hire poor workers will reduce the number of poor workers they hire. Why? Because the workers will be more expensive. Bernie Sanders has written a law whose purpose is to harm the working poor.
Sanders hasn’t held a job outside of government for almost half a century, so he might not know what it means to demonstrate his worth to an employer. When senators want to be paid more, they pass a law and the IRS takes the money it needs from the rest of us. From a senator’s perspective, getting a raise is a lot like waving a magic wand. Sanders seems to think that the rest of the economy is just as magical.
Why Are We Trying to Punish Success?
Not understanding labor markets is bad enough. But Sanders appears not to understand where capital comes from either. Jeff Bezos and Amazon’s investors took a tremendous risk in building Amazon. Entrepreneurs drive innovation, and the possibility of profit encourages investors to back them. Everybody sees successful entrepreneurs like Bezos, Bill Gates, and Warren Buffett. But no one remembers the 90 percent of entrepreneurs who failed or the money their investors lost in the process. Yet we want entrepreneurs and investors to keep taking risks because the 10 percent who do succeed provide better products, in more variety, at lower prices, and create millions of jobs in the process.
How do we best encourage entrepreneurs and investors to take risks? By allowing them to keep the profits they earn. Amazon earned $3 billion in profits last year. But it took over $130 billion in assets to get there. That $130 billion is what’s at stake. That’s what investors stand to lose when, not if, Amazon fails. Because all businesses eventually fail as new entrepreneurs come along with new and better ideas. Just ask Sears or Montgomery Ward, the Amazons of bygone years.
Entrepreneurs drive innovation, and the possibility of profit encourages investors to back them.
If he really cared about helping people, Sanders would take a sabbatical from his government job, start a business with his own savings, and hire some people to help him produce something customers are willing to buy. After experiencing how labor and investment markets actually work, he would be in a better position to tell the rest of us how to manage our affairs.