By all means, let’s raise the living standards of workers at Amazon, Walmart, McDonald’s and other employers of low-wage Americans.
But the sloppily designed Stop Bad Employers by Zeroing Out Subsidies Act (a.k.a., ahem, the “Stop BEZOS Act”) is a terrible way to do either of these things. It’s virtually guaranteed to hurt the very low-income working families its sponsors want to help.
The bill, introduced Wednesday by Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Calif.), would establish a “corporate welfare tax” on firms with at least 500 employees. Companies would pay a tax equal to 100 percent of the value of safety-net benefits their employees receive, including Medicaid, housing subsidies, food stamps and subsidized school lunches.
That means, for instance, that if Medicaid shelled out $15,000 to pay the health bills of a Walmart employee, Walmart’s taxes would rise by $15,000.
“The working families and middle class of this country should not have to subsidize the wealthiest people in the United States of America,” Sanders said. “That’s what a rigged economy is all about.”
Which sounds like a reasonable complaint. Big companies and the wealthy aren’t paying their fair share in taxes; many are getting rich on the backs of low-wage workers. But the Sanders-Khanna prescription does not cure the disease. Instead, it just creates powerful new incentives for companies to shaft the most powerless workers.
The bill would discourage firms from hiring low-skilled workers. That’s a given. But worse, it would discourage them from hiring workers suspected of drawing benefits. These workers come, disproportionately, from some of the most vulnerable populations: families with children, older people and workers with disabilities.
Why would families with children be at risk?
Some of the safety-net benefits included in the bill, such as subsidized school lunches, apply only to children. But workers with children are also more likely to qualify for those that don’t, such as food stamps. That’s because benefit eligibility is determined not only by a person’s wage but also total household income and household size.
Programs are structured this way to account for how many mouths a given income is feeding. A childless 23-year-old who lives alone and has a gross income of $20,000 a year typically would not qualify for food stamps. But at the same income, a single 30-year-old mom with a child would.
Now imagine if Stop BEZOS were on the books. For a job that pays $20,000, which kind of worker might employers avoid?
Under this bill, Medicaid-eligible workers with disabilities or other health issues would become thousands of dollars more expensive. Working-age people over 45, who cost Medicaid about twice as much as their younger counterparts, might face even more discrimination in the job market than they already do.
The bill tries to address these issues by barring employers from asking job candidates about benefits. But firms could easily infer which applicants are more likely to get them, based on their races, genders, Zip codes, etc. Such “statistical discrimination” would be difficult to police.
Moreover, employers get information about dependents and marital status when newly hired workers fill out their HR forms. Guess which workers would be at the top of the list when it’s time to downsize?
In response to all of this, workers might reasonably choose to forgo benefits that they or their children need in hopes of scoring more job security. Or, because the proposal is tied to a firm’s size, companies could choose to contract out even more of their low-wage work — a phenomenon associated with reduced wages for low-skilled workers.
Perhaps worst of all, as the Center on Budget and Policy Priorities points out, the bill would ultimately create a new corporate constituency to push for cuts to social programs and stricter eligibility requirements. Suddenly, reductions to Medicaid or school lunches would be directly equivalent to a corporate tax cut.
If you want to help workers, there are lots of alternatives less likely to backfire than this. Raise the minimum wage. Eliminate noncompete clauses. Increase other kinds of benefits (such as paid family leave). Make it easier for workers to unionize. Of course, these proposals need to be designed carefully, too, to make sure they help more workers than they hurt.
As economists repeat ad nauseam: Incentives matter. No number of strident news conferences vilifying billionaires and big corporations will ever change that.