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House Signals Compromise On Minimum Wage Bill Tax Breaks

by Leroy Baker, Tax-News.com, New York

09 February 2007

The US House of Representatives's leading tax writer has indicated that he would be prepared to include some tax breaks for small businesses into the minimum wage increase bill currently sitting in Congress in order to get the measure passed.

Charles Rangel (D - NY), Chairman of the House Ways and Means Committee, revealed to reporters this week that he will sit down with key House legislators on Monday to draft a bipartisan package of tax breaks totaling about $1 billion to help small businesses swallow the cost of an increase in the minimum wage to $7.25 per hour from $5.15.

"I'm prepared to send something over there for (the Senate) to be able to attach a tax package," Rangel said.

Rangel's comments are significant as House Democrats had previously insisted that they would only send a 'clean' minimum wage bill to be signed into law by the President.. They argue that an increase in the minimum wage, which has remained static for ten years, is long overdue, while businesses have already benefited substantially from tax cuts passed under the George W. Bush administration. However, a clean minimum wage bill has little chance of attracting the 60 votes needed to clear the Senate, thus avoiding a filibuster or other procedural impediments, so the Senate Finance Committee has drafted a version of the bill which included much of the language of the House legislation, but with more than $8 billion in business tax breaks. This was approved by the Senate earlier this month, and proposes measures such as extended expensing, leasehold improvements, S-Corp reforms and an extended Work Opportunity Tax Credit for five years.

Nonetheless, even if House tax writers agree to include tax breaks into their version of the bill, there will still be some distance to go before the two chambers agree a compromise since Rangel has no intention of considering tax cuts on the scale as those approved by the Senate.

"When you start with $8 billion, my hearing aid is off," he quipped at a press briefing.

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