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Without Tax Relief, Wage Hike Stalls

A House bill that would raise the minimum wage encounters opposition in the Senate.
Sarah JohnsonJanuary 24, 2007

Efforts to increase the minimum wage stalled in the Senate on Wednesday, as Republicans renewed attempts to tie the increase to tax credits for smaller businesses.

The “clean” version of the bill, already passed by the House of Representatives, has just one goal: to raise the minimum hourly wage from $5.15 to $7.25, in three increments over about two years. Senators voted 54-43 to shut off debate and consider the bill; 60 votes would have been needed to end debate.

Despite the bill’s passage in the House, most Republicans and business advocates intend that any such proposal should include relief for small companies. Indeed, on Wednesday, all 43 dissenting votes were cast by Republicans. President Bush has also said he would support a bill offering a $2.10 hike, provided that it includes tax and regulatory relief for business.

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Democrats have pushed for a quick passage of a wage hike. At a recent Senate Finance Committee meeting, chairman Max Baucus (D-Mont.) said he predicts a minimum-wage increase will be signed by the president this year. Since the last increase nearly 10 years ago, more than half the states have passed their own bills requiring companies to pay their lowest-paid workers more than $5.15 per hour; many require more than $6.50 per hour.

Small-business advocates, including the U.S. Chamber of Commerce, have asserted that raising the minimum wage could force small-business owners to eliminate jobs, reduce hours, and cut employee benefits. However, linking an increase in the minimum wage to tax breaks for business has derailed previous legislative efforts.

That leaves Congress searching for a compromise. Chuck Grassley (R-Iowa), the ranking Republican on the Senate Finance Committee, repeated a sentiment shared by his party members during a committee hearing: “[The] reality is a minimum wage hike would likely not pass the Senate without small business tax relief.”

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