Congressional Negotiators Reach Deal On Tax Incentives To Go With Minimum Wage Increase

Friday, April 20th 2007, 8:33 pm

By: News On 6

WASHINGTON (AP) _ Democratic efforts to raise the minimum wage to $7.25 an hour got a big boost Friday evening as House-Senate negotiators reached a deal on a package of business tax incentives accompanying the wage increase.

Differences over how to ease the impact of raising the wage on small business has delayed final action for weeks. Democrats attracted criticism from GOP rivals and the media for not enacting a single signature goal in their first 100 days in the congressional majority.

The wage would increase from $5.15 to $7.25 per hour over the next two years under companion House and Senate bills, but the two chambers struggled over how much tax help to award businesses employing minimum wage workers. The House originally passed a minimum wage bill without tax breaks for businesses, but the Senate insisted on tax breaks totaling more than $8 billion over eight years to ease passage through that chamber.

That prompted the House to counter with $1.8 billion in tax relief.

Congress last increased the minimum wage in 1996, and the wage had fallen to the lowest level in five decades after accounting for inflation.

The legislation would raise the minimum wage in three steps. It would go to $5.85 an hour 60 days after the president signed it into law, then to $6.55 an hour a year later and to $7.25 an hour a year after that.

Negotiators from the House and Senate tax-writing committees agreed on $4.8 billion in tax cuts for small businesses over 10 years, far less than provided under GOP control of Congress in 1996. The tax relief would mostly be offset by a series of new Internal Revenue Service enforcement steps and higher penalties for erroneous returns.

About half the tax relief would go to extend tax breaks for businesses hiring people on welfare and other difficult-to-hire workers.

``This package provides common sense, responsible tax relief so our small businesses can continue to hire new workers and promote economic growth in our communities,'' said Ways and Means Committee Chairman Charles Rangel, D-N.Y.

The top Senate Finance Committee Republican, Charles Grassley of Iowa, complained that the compromise bill would give only bare-bones relief to businesses hiring minimum wage workers _ and that Democrats stripped key revenue-raising reforms under pressure from business interests. Democrats dropped language closing loopholes on offshore tax shelters and capping deferred compensation payments to corporate executives.

``This package is stripped of a lot of meaningful tax relief,'' Grassley said. ``Missing are many of the tax-abuse crackdowns from the Senate bill. Apparently the lobbyists crocodile tears over those crackdowns were effective.''

More than two dozen states and the District of Columbia have minimum wages higher than the federal level. The issue proved to be potent last November when six states raised their minimums in statewide votes. Minimum wage workers are typically young, single and female and are often black or Hispanic. Democrats claim the wage hike will directly help more than 5 million workers.