Senate passes minimum-wage, tax break bill

NEW YORK (CNNMoney.com) -- The Senate voted 94-3 Thursday to increase the federal minimum wage in three steps from $5.15 to $7.25 in a bill that also gives $8 billion worth of tax cuts to small business.

The bill, following an exhaustive debate that brought dozens of proposed amendments mostly by Republicans, now goes back to the House of Representatives, where the original bill passed on Jan. 10 with no amendments.

The difference between the Senate bill and the "clean" House bill will become a test of the Senate's and the House's will to compromise.

Sen. Sherrod Brown (D-Ohio) invoked civil rights leader Martin Luther King in a press conference after the vote: "MLK said equality means dignity and dignity demands a paycheck that lasts throughout the week," Brown said. "This is a small down payment on social justice."

But both sides claimed victory.

"This is a testament to what we can accomplish when we work together to move critical legislation forward," said Senate Minority Leader Mitch McConnell (R-Ky.). "We look forward to working with the House of Representatives to send a final bill to the President that will be a victory for both those who earn the minimum wage and those who pay it."

The added tax breaks are an attempt to compensate small businesses, which many argue will bear the brunt of a minimum-wage increase. To pay for those tax breaks, the Senate bill includes provisions closing corporate tax loopholes and provisions that would also cap the amount of tax-deferred compensation executives are entitled to.

The House technically has the right to set aside any tax or budget bill that come from the Senate.

Rep. Charles Rangel (D-N.Y.), chair of the House Ways and Means Committee, had earlier reiterated his prerogative to "blue-slip" or set aside indefinitely such a bill coming from the Senate.

Senate Republicans and President Bush, however, have said they wouldn't support a minimum-wage bill without tax breaks for small business.

House Democratic staffers say the mood in the House is to let the Senate do what it needs to do in order to get a bill passed there.

Democratic senators were optimistic about compromise. Sen. Edward Kennedy (D-Mass.), a longtime advocate of the minimum-wage raise, said, "with a vote of 94-3 this is going to happen," noting, however, that he hopes it happens sooner rather than later.

A minimum-wage hike, which hasn't occurred since 1997, has been a key piece of the first 100 hours of legislation promised and passed by the newly elected Democratic majority in the House.

A minimum-wage hike would directly affect 6.6 million workers currently earning the $5.15 wage, according to the labor-backed Economic Policy Institute.

The hike could also increase the wages of another 8.3 million who earn just above the minimum. Workers in 28 states plus Washington, D.C., already have a higher minimum wage. A number of those states have automatic increases for inflation.

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