Raising minimum wage not so simple

Tax cuts demanded by congressional Republicans

February 17, 2007|By New York Times News Service

WASHINGTON --When Democrats campaigned last fall to recapture control of Congress, few domestic issues seemed to have as much winning potential as raising the minimum wage.

Democrats ostentatiously signed pledges to block any pay increase for Congress until it raised the minimum wage. They organized ballot initiatives to raise state minimum wage laws. And when they did recapture the House and Senate, Democrats made it a top legislative priority.

Yet after six weeks in power, the Democratic-led House and Senate have yet to agree on a final bill.

The obstacle? The same one that stymied Republicans time after time when they had majority control: paralyzingly thin margins in the Senate.

Yesterday, the House voted 360-45 to pass a $1.3 billion tax cut for small business, which will be linked to a bill that would raise the minimum wage to $7.25 an hour from $5.15.

But the Senate, where Democrats need Republican votes to prevent a filibuster, has coupled the minimum wage bill with $8.3 billion in tax cuts for small business.

Lawmakers are not expected to reconcile the difference until after their "Presidents' Day District Work Period" next week, and it remains unclear how difficult those negotiations will be.

Further muddying the outlook is a split between small-business groups and big-business groups over which bill to support.

"I would not say we're surprised at the delay," said Rep. Sander M. Levin, a Michigan Democrat. "But I would say we are chagrined."

Few lawmakers doubt that Congress will eventually approve the higher minimum wage, which was last raised 10 years ago. The battle is over how much business groups and Republicans can demand in return.

Republican lawmakers have insisted that Congress link an increase in the minimum wage, which business groups have long opposed, to tax cuts that they say would ease the burden for small businesses.

House Democrats initially ignored those demands, passing a "clean" minimum-wage bill with no tax cuts last month.

But Senate Democrats, who needed Republican votes to attain a 60-vote majority to cut off debate, agreed to include $8.3 billion in tax cuts over the next five years.

The Senate tax cuts included a one-year extension of a tax cut that lets small companies write off up to $100,000 a year in equipment spending as well as extensions of tax breaks that allow restaurants and small shops to write off property improvements more quickly.

Those measures have strong support from small-business groups, led by the National Federation of Independent Business.

But the Senate bill provoked staunch opposition from the U.S. Chamber of Commerce, which objected to revenue-raising provisions that would have eliminated tax deductions on certain forms of executive compensation and for the cost of settling lawsuits.

The Chamber, which represents both small and large companies, supported the House bill with its smaller tax cut and provided enough political cover for 141 Republicans to join 219 Democrats in voting for passage.

"Bipartisanship is alive and well in the House of Representatives," declared Rep. Charles B. Rangel, a New York Democrat who is chairman of the House Ways and Means Committee, after the vote yesterday.

Some Republicans were far less enthusiastic than their votes suggested, taking comfort that they had at least exacted some price for their cooperation.

"The simplest argument in favor of this is that it's got the Chamber's support," said Rep. Darrell Issa, who voted "aye" but complained that the bill was not a "real tax cut" at all.

"They're giving a tax cut to small business but raising taxes on the rich," the California Republican complained. One provision, for example, would eliminate a tax break that allows wealthy families to reduce capital gains taxes by shifting some of their income to their children.

Levin, a senior member of the Ways and Means Committee, said he and most other House Democrats would have preferred to avoid the whole issue of tax cuts.

"It's all about getting 60 votes in the Senate," he said wearily.

But Democrats made the task more complicated than it would have been last year because they re-imposed "pay as you go" rules that require Congress to offset the cost of any new tax breaks with savings or revenue increases in some other area.

Even if the House and Senate come to agreement, the skirmish over comparatively tiny tax cuts tied to the minimum wage bill is likely to be a harbinger of far more vexing battles later this year.

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