Bad for Business

Bad for Business

Georgia Republicans are poised to reject any raise in state minimum wage, claiming that such an increase will hurt small businesses. Yet these same legislators are vying for a hefty increase in the state sales tax – a move that affects local businesses far worse than a minimum wage increase.

Inflation has eroded the real minimum wage to a level 30% below the 1968 minimum wage. Last legislative session 39 states at least entertained raising their minimum wages. Georgia alone attempted to drop the minimum wage. Our state senators passed a bill to cut young workers down to $4.25 an hour for their first 90 days of employment – a move that encourages retailers to install a revolving door of job instability.

Senator Jeff Mullis, who voted in favor of the cut, has recently hedged the issue by claiming he would favor an increase if it could be made “palatable to businesses.” In Georgia, the minimum wage law is already made palatable to businesses by exempting those with fewer than six employees or revenues under $40,000 per year. Georgia minimum wage law does not cover high school or college students, newspaper carriers, domestic employees, farm workers, or anyone who receives tips.

State Representative Ron Forster not only opposes a raise in minimum wage; he would like to eliminate the minimum wage altogether. Like many other Libertarians who call themselves Republicans, Forster claims minimum wage laws hurt small businesses, damage the economy, and cause job loss. This mantra is outdated and demonstrated faulty by years of empirical data. Employment grows 1-2% more quickly in states that have a higher minimum wage. Annual and average payroll growth is also faster in those states. Further, the number of small business establishments grows twice as fast in states with higher minimum wage standards. Businesses absorb wage increases through higher productivity, decreased turn-over costs, lower absenteeism, and improved worker morale. In fact, 75% of business owners in a Gallup survey said they would be unaffected by a minimum wage increase of 10%. Nearly half favored a minimum wage increase.

What happens when these supposedly pro-business legislators encounter the threat of a sales tax increase? On March 7th Senator Mullis told the Catoosa County News he would “wholly support the idea and the legislation” of a 1 cent sales tax increase. That’s a jump of 25%, coming from a legislator who promised in December that with Republicans in charge, we should expect “no new taxes.” (He forgot to preface the statement with “Read my lips.”) Mullis admits that the proposed sales tax increase represents billions of dollars of additional tax payments. Who will be footing the bill for this increase? Every Georgia citizen, rich or poor, will feel the impact.

Sales tax increases also hurt the small businesses Republicans claim they want to protect. Consider an area like Catoosa County. Currently we undercut Tennessee’s sales tax by 3 cents (closer to 2 cents when you consider local taxes.) Catoosa has enjoyed that tax advantage as an incentive for Tennessee consumers to spend billions of dollars in North Georgia. Despite Chattanooga’s wider range of offerings, Tennesseans will drive across the state line for that tax savings. As that tax difference levels off, local businesses can expect to lose both Tennessee customers and Georgia customers to Chattanooga.

Politicians who truly want to protect local businesses should stand against a sales tax increase. Use your weight to maintain a pro-growth business environment, not to step on the grocery bagger who is still subsisting on $5.15 per hour.

-- Jeannie Babb Taylor
Published March 20, 2007