WASHINGTON - The Senate voted overwhelmingly Thursday to boost the federal minimum wage by $2.10 to $7.25 an hour over two years, but packaged the increase with controversial tax cuts for small businesses and higher taxes for many $1 million-plus executives.
The increase in the minimum, the first in a decade, was approved by a 94-3 vote, capping a nine-day debate over how to balance the wage hike with the needs of businesses that employ low-wage workers.
A top priority of Democrats, the wage hike has both real and symbolic consequences. It would be one of the first major legislative successes of the new Democratic-controlled Congress.
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President Bush urged the House to support the measure, including the tax help for small business. He said, "The Senate has taken a step toward helping maintain a strong and dynamic labor market and promoting continued economic growth."
It doesn't surprise me that the Senate Republicans attached the small business tax breaks on to the minimum wage bill. In fact, it doesn't surprise me that President Bush has practically demanded that business tax breaks should be attached to the minimum wage bill. According to this December 20, 2006 KOAT Action News story:
On domestic politics, Bush said he supports a hike in the minimum wage. But he said it must be tied to "targeted tax and regulatory relief to help these small businesses stay competitive and help keep our economy growing."
He said he also saw an opening for compromise with the Democratic-controlled Congress that convenes on Jan. 4. on Social Security and immigration.
"Another area where we can work together is the minimum wage," Bush said. I support the proposed $2.10 increase in the minimum wage over a two- year period. I believe we should do it in a way that does not punish the millions of small businesses that are creating most of the new jobs in our country. So I support pairing it with targeted tax and regulatory relief, to help these small businesses stay competitive and to help keep our economy growing.
President Bush and the Republicans knew that the Democrats would place the minimum wage bill on top of the domestic agenda. The Republicans tried to link the minimum wage bill with an estate tax cut, but that bill died in the Senate. So we get this new minimum wage bill with its token tax cuts. According to the MSNBC story:
The bill must now be reconciled with the House version passed Jan. 10 that contained no tax provisions. House Democrats have insisted they want a minimum wage bill with no strings attached, though some have conceded the difficulty of passing the legislation in the Senate without tax breaks.
Republicans stressed the importance of the business tax breaks in the bill, though it was a significantly smaller tax package than Republicans had sought during previous attempts to raise the minimum wage.
"The Senate's reasonable approach recognizes that small businesses have been the steady engine of our growing economy and that they have been a source of new job creation, a source of job training," said Sen. Michael Enzi, R-Wyo., who helped manage the debate for the GOP.
The bill presents a challenge to Democrats who must navigate between the demands of labor and other interest groups and the realities of the Senate, where Republicans hold 49 of 100 votes. House and Senate Democrats will try to negotiate a way out of the potential standoff.
House Speaker Nancy Pelosi, D-Calif., has said she supports some of the tax provisions in the House package, but she also has said she would prefer they be put in a separate, House-initiated tax bill.
A spokesman for Senate Majority Leader Harry Reid, D-Nev., said the tax breaks are necessary to overcome a potential GOP filibuster.
"Of course, Democrats would prefer to pass a clean increase in the minimum wage," said the spokesman, Jim Manley. "The fact is that Republicans have made it very clear that the only way we will pass a modest increase in the minimum wage is with tax breaks for small business."
We will just have to see what happens in the conference committee meetings between the House and Senate on this bill.
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