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US Senate Rejects 'Clean' Minimum Wage Bill

by Leroy Baker Tax-News.com, New York

26 January 2007


Democratic hopes for the swift passage of a 'clean' minimum wage bill are fading, after the Senate declined to approve a House measure calling for an increase in the federal minimum wage without including offsetting tax breaks for businesses.

While the Senate voted 54 to 43 in favour of H.R.2, a bill to increase the minimum wage without accompanying tax breaks, this fell well short of the 60 votes needed for the bill to have passed.

Earlier in the month, the House passed the Fair Minimum Wage Act of 2007 with bipartisan support, after lawmakers voted 315 to 116 in favour of the proposals. The bill would raise the federal minimum wage to $7.25 per hour from $5.15 per hour over two years, and would be the first increase in the minimum wage for ten years.

While Sen. Max Baucus, the Democratic Chairman of the Senate Finance Committee said that he is in favour of a clean minimum wage bill, he has taken the pragmatic view that such a measure has little chance of clearing the Senate without accompanying tax breaks to help businesses offset the cost of a minimum wage hike.

“It was good to have a vote on the clean minimum wage bill. I know a lot of folks wanted a minimum wage increase alone. I voted for that too. But we’ve always known the reality: we need 60 votes in the Senate to increase the minimum wage," he said after the Senate vote.

Baucus has worked with ranking member Sen. Chuck Grassley and others to write a small business tax incentives package that he says will help get 60 votes and let Congress increase the minimum wage. The Small Business and Work Opportunity Act of 2007 extends tax relief for small businesses with a tax credit for firms that hire disadvantaged workers, and allows accelerated cost write-offs for retailers and restaurant owners remodeling leased buildings.

Baucus continued:

“My home state of Montana is a small business state – like many other states in the country. Small businesses account for more than 95% of the jobs in our state. I want to help our hard-working Montanans and Americans get the wages they deserve and help our small businesses too."

“We’re trying to work with Republicans to get a reasonable number of amendments considered to the substitute amendment to H.R. 2, so that this bill can come to a vote. Today I am urging swift and resounding Senate passage of this legislation. I want to get a minimum wage increase to America’s workers.”

However, the compromise efforts were slammed by Sen. Edward Kennedy, the leading sponsor of the clean minimum wage bill in the Senate.

"Why can't we do just one thing for minimum wage workers, no strings attached, no giveaways for the powerful?" he asked.

Kennedy noted that there is little precedent for pairing minimum wage increases with tax breaks for business, and doing so this time could significantly delay a long overdue increase.

"Minimum wage workers could wait months for the raise they so clearly deserve," he observed. "We’ve had bipartisan support for minimum wage increases in the past with no tax giveaways. We’ve increased the minimum wage nine times since the enactment of the Fair Labor Standards Act, under both Republican and Democratic Administrations. Only once – in 1996 – did we pair a minimum wage increase with tax cuts."

"Businesses can afford to give workers a raise and employers can afford to increase wages in the current economy," he argued, concluding that: "Productivity has increased by 29% since 1997, and corporate profits have increased by 45%, yet minimum-wage workers have not received a raise."


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