Minimum Wage Tax Breaks Become Collateral Damage

by Mike Godfrey, Tax-News.com, Washington

03 May 2007

President George W. Bush has carried out his threat to veto the Iraq war supplemental bill, which contained almost $5 billion in tax relief for small companies.

Speaking at a White House press conference on Tuesday evening, Bush said that he would not accept legislation which committed US troops to an "artificial" timetable for withdrawal from Iraq. For America's small businesses, this means a further wait for tax breaks to help them swallow the cost of a proposed increase in the federal minimum wage to $7.25 per hour from the current $5.15 per hour - the first increase for a decade.

However, the $4.84 billion package, almost half the amount originally agreed by the Senate, had been derided by some Republicans and the White House for failing to provide adequate tax relief, and a stand-alone bill faced presidential veto.

Responding to Bush's veto threat, Sen. Max Baucus, Finance Committee Chairman and one of the principal authors of the tax legislation along with House Ways and Means Committee Chairman Charles Rangel, last week defended the proposals.

“The small business tax relief contained in the supplemental spending bill would do good things for America’s small businesses," he said, going on to add that: "It’s particularly disappointing that the White House is already promising to oppose this package of small business tax relief if it moves forward as stand-alone legislation. Bottom line, the White House shouldn’t stand in the way of steps to help America’s small businesses."

However, Republicans say that Democrats could have got both minimum wage and tax breaks through Congress by now if they hadn't attached the tax relief package to the war supplemental bill, a move that White House spokesman Tony Fratto described as a "political stunt that only further delays action".

A House vote on a veto override was expected to fail on Wednesday afternoon. No such vote has been scheduled in the Senate. President Bush was due to discuss the situation with leaders of both chambers yesterday afternoon.

The fate of the minimum wage and tax relief provisions is at this point unclear, although House Majority Leader Steny H. Hoyer, (D-Md) has hinted that they would be included in a new war supplemental bill.

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