Print

Email story

Comment

Email editor

Minimum wage hike clears Senate; hurdles remain

The plan to up the wage to $7.25 an hour passes easily, but differences with the House bill still have to be resolved.

By ASSOCIATED PRESS
Published February 2, 2007

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 small business tax cuts and limits on corporate pay that could complicate its path to become law.

The increase in the minimum wage, the first in a decade, was approved 94-3, capping a debate over how to balance the wage hike with the needs of businesses that employ low-wage workers.

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.

"Passing this wage hike represents a small but necessary step to help lift America's working poor out of the ditches of poverty and onto the road toward economic prosperity," said Sen. Edward Kennedy, D-Mass.

Republicans pointed to the importance of the bill's business tax breaks, though it was a significantly smaller tax package than the GOP 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 must now be reconciled with the House version passed Jan. 10 that contained no tax provisions. House Democrats have said 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.

House and Senate Democrats now must try to negotiate a way out of the potential standoff.

House Speaker Nancy Pelosi, D-Calif., has said she supports some tax provisions in the House package, but said she would prefer them in a separate, House-initiated tax bill.

In a statement, President Bush encouraged House Democrats to accept the Senate version of the bill. "The Senate has taken a step toward helping maintain a strong and dynamic labor market and promoting continued economic growth," Bush said.

The three senators voting against the bill were Republicans Tom Coburn of Oklahoma, Jon Kyl of Arizona and Jim DeMint of South Carolina. Absent from the vote were Democrats Tim Johnson of South Dakota and Charles Schumer of New York and Republican James Inhofe of Oklahoma.

The legislation would raise the minimum wage in three steps. It would go to $5.85 an hour upon taking effect 60 days after the president signs it into law, then to $6.55 an hour a year later, and to $7.25 an hour a year after that.

According to the Labor Department, 479,000 workers earned exactly $5.15 an hour in 2005, the most recent estimate available.

More than two dozen states and the District of Columbia have minimum wages higher than the federal level. The issue proved to be potent last November when six states raised their minimums in statewide votes.

Fast Facts:

Senate, House at odds

Both the House and Senate have passed bills raising the minimum wage, but the measures have differences that must be resolved before they go to the president. The Senate bill includes the following provisions, none of which are in the House bill:

-Extend a tax credit for businesses that hire the poor, high-risk youths and veterans on government assistance.

-Extend until 2010 the ability small businesses have under current law to deduct up to $112,000 in capital costs.

-Extend through March 31, 2008, tax breaks to shorten depreciation periods for restaurant and retail properties.

-Increase the threshold for businesses eligible to use cash method of accounting from average gross receipts of $5-million to $10-million.

-Protect against Internal Revenue Service claims those businesses that use professional employer organizations for payroll and other human resources functions

-Eliminate tax deductions for punitive damages, fines and penalties.

-Cap allowable tax-deferred income at $1-million, or at 100 percent of the average annual salary over a five-year period. Compensation packages that exceed the cap would trigger taxes on all deferred compensation, plus penalties.

[Last modified February 2, 2007, 01:53:02]