The House on March 9 approved legislation to increase the minimum wage and to provide tax breaks for businesses. Approved as two separate pieces of legislation, the measures were combined under the same bill number (H.R. 3081) following passage.
The President already has criticized the tax package and vowed to veto it if it reaches his desk, whether or not it is attached to a minimum wage increase.
Although Republican leaders garnered sufficient support for a controversial rule for debate, they were unable to prevent lawmakers from adopting a version of the minimum wage increase opposed by the GOP leadership. The rule, which split the minimum wage vote from the tax-cut vote, was constructed to allow lawmakers to vote for either package without being required to vote for both.
Minimum Wage The minimum wage package (H.R. 3846), which was approved 282-143, would increase the federal hourly minimum wage from $5.15 to $6.15 over two years. The original version of the bill supported by Republican leaders would have provided the $1 increase over three years instead of two. However, an amendment offered by Reps. James Traficant (D-OH) and Matthew Martinez (D-CA) to phase-in the change over two years was approved, 246-179.
The action came amid general acknowledgement that Congress likely would move an election-year minimum wage hike. The last minimum wage increase, which was phased-in over two years, was approved in 1996.
Rep. Karen Thurman (D-FL) said, “Today in America, there are about 203,000 women working full time for minimum wage. These women are working to support their families; these are not high school students working for extra spending money.” She added, “Raising the federal minimum wage by $1 would give these mothers an extra $2,000 a year. That $2,000 would feed a family of four for seven months.”
The bill originally included a provision by Rep. Jim DeMint (R-SC) that would have allowed states to opt out of the increase, retaining the current $5.15 wage floor if so desired. However, Rep. DeMint eventually withdrew that provision in exchange for assurances that his views and those of other conservatives will be strongly considered during debate over the FY2000 supplemental appropriations bill. Floor action on that measure is likely in the near future.
Tax Breaks A package of tax breaks for businesses (H.R. 3081) was approved, 257-169. Republican leaders insisted on moving the measure along with H.R. 3846, as compensation for the additional labor costs brought by the wage hike.
Expressing support for the approach, Rep. Nancy Johnson (R-CT) said, “We will increase the minimum wage, but we will also cut costs for our small businesses so they will have the revenues to pay the higher wage without laying people off.” She said the combination of bills “very carefully and realistically focuses on job retention, as well as fair wages.”
Rep. Sue Kelly (R-NY) said, “We have the opportunity to level the playing field for small businesses today with this legislation.”
However, several Democrats criticized the tax-cut package as excessive. They also objected to the rule for debate, which did not allow them to offer a smaller substitute tax-cut proposal.
Rep. Maxine Waters (D-CA) said it is “outrageous” that “we cannot have this modest increase in the minimum wage until we do some more tax cuts for the rich.”
Rep. Sheila Jackson Lee (D-TX) said small businesses deserve tax breaks, but H.R. 3081 “does nothing to help small businesses” because its benefits would not affect businesses with earnings in the range of $2.5 million. “Really this tax cut is for those whose net is $30 billion,” she said.
According to Joint Tax Committee estimates, the tax package would reduce federal revenues by $45 billion over five years. A previous estimate had placed the bill’s cost at $30 billion, but the amount was later increased in light of revised federal revenue estimates.
The tax bill’s provisions include:
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Senate Action On February 2, the Senate approved a bankruptcy reform bill (H.R. 833). A minimum wage hike and a package of business tax breaks were attached to that legislation during debate (see The Source, 2/4/00, p. 1).
However, congressional leaders face procedural difficulties in starting a Senate-House conference, as the Constitution requires that tax measures originate only in the House. With the tax package attached, the Senate’s bankruptcy bill would be ruled out of order if it were brought to conference.
In addition, the two chambers’ approaches vary significantly. The Senate-passed bill would increase the federal hourly minimum wage to $6.15 over three years instead of two. The Senate’s tax package, with an estimated cost of $18 billion over five years, also contrasts with H.R. 3081 in several aspects. For instance, the Senate version includes a permanent extension of the Welfare-to-Work Tax Credit and the Work Opportunity Tax Credit, while neither of those credits would be extended under the House bill. Also unlike the House bill, the Senate’s bill would not accelerate the full deductibility of health insurance purchased by self-employed individuals.