House looks to attach tax breaks to minimum wage bill

Friday, February 9th 2007, 5:47 pm

By: News On 6

WASHINGTON (AP) _ House tax writers will consider small business tax cuts worth $1.3 billion over 10 years in hopes of freeing minimum wage legislation currently stuck in an impasse between the House and Senate.

The tax package is about one-sixth the size of what the Senate passed last week, but it sets the stage for negotiations that could result in the first increase in the minimum wage in a decade. The legislation would raise the wage floor by $2.10 over two years to $7.25 an hour.

``Now at least we've got a ball game,'' said Sen. Max Baucus, D-Mont., the chairman of the Senate Finance Committee.

The House proposal has the bipartisan backing of Ways and Means Committee Chairman Charles Rangel, D-N.Y., and the panel's ranking Republican, Rep. Jim McCrery of Louisiana. The committee is expected to consider the proposal Monday. The legislation would then go to the House floor later in the week.

The tax breaks would be paid for by eliminating a tax loophole that permits wealthy taxpayers to shift income to their children in order to avoid high capital gains and dividend tax rates.

In drafting the latest language in the legislation, House Democrats made an abrupt shift from their public insistence just days ago that they wanted Congress to pass minimum wage legislation without any tax relief in it.

Most of the tax cuts in the House bill are short term and would actually be worth $4.5 billion over the first five years, according to Congress' Joint Committee on Taxation. But because Congress prices legislation over 10 years, the tax package total through 2017 is $1.33 billion. The Senate bill's tax package is worth $8.7 billion over the first five years and $8.3 billion over 10 years.

Senate Democrats had been signaling to the House that a tax cut package was the only way to guarantee needed Republican support for the bill in the Senate. With 49 members in the 100-member Senate, Republicans can easily use procedural tactics to delay or kill legislation unless Democrats can line up 60 votes to hold a vote on a bill.

``This bill strengthens opportunities for small businesses and serves as a symbol of what can happen when Democrats and Republicans work together,'' Rangel said. ``This tax relief will help small businesses continue to grow and hire new workers to keep our economy strong. This is a bipartisan bill providing critical momentum for the bipartisan effort to raise the minimum wage.''

McCrery said: ``This bill will provide nearly $2 billion in tax relief, and unlike in the Senate bill, much of that relief will be immediate - helping business when costs are rising, not just down the line.''

Senate Majority Leader Harry Reid, D-Nev., expressed optimism about the prospects for the legislation.

Asked whether the Senate could accept a scaled back tax package, he said: ``It's a billion-and-a-half more than we were originally thinking we'd get, so we'll have a look at it.''

The House proposal would extend for one year a tax credit for businesses that hire disadvantaged workers, included the poor and wounded veterans. It also extends and increases certain small business expensing provisions and would allow restaurants to continue to receive a credit for Social Security taxes paid for tips to employees above the current minimum wage of $5.15 an hour.

Sen. Charles Grassley, R-Iowa, the ranking Republican on the Senate Finance Committee, said the House bill falls short by not including Senate-passed measures that close corporate tax loopholes and tax shelters.

``The Senate-passed tax relief bill for the minimum wage increase was already peanuts,'' he said, when compared to the 1997 minimum wage bill that contained more tax breaks.