Minimum wage increase inches closer

Agreement on $4.8 billion in tax cuts paves way for first increase in 10 years - after showdown over Iraq funding.

By Chris Zappone, staff writer

NEW YORK ( -- Key leaders in the House and Senate have agreed to a package of tax-breaks for small business that should ease the passage of the minimum wage bill.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) announced Friday that they had come to an agreement on tax breaks for small business totaling about $4.8 billion.


The Senate Finance Committee had originally proposed tax breaks of $12 billion while the House approved a smaller $1.3 billion package. The difference had been a stumbling block between the House and Senate, stopping them from sending a minimum wage increase to the president for his signature.

"We have reached final resolution - and I mean final - on a package of small business tax credits that will enable us to pass the first increase in the federal minimum wage in nearly a decade," Rangel said in a statement Friday.

The minimum wage agreement flowed out of the conference between the House and Senate on the war supplemental budget, passed by both chambers in March.

Senator Charles Grassley (R-Iowa), ranking member of the Senate finance committee, expressed dissatisfaction with the reduced tax-breaks.

"The relief was supposed to be contemporaneous with the wage increase so small businesses wouldn't cut jobs," Grassley said in a statement. "The Senate package was barely adequate. I called it peanuts. The House package was puny. I called it a peanut shell. Now we have a single shriveled peanut. This package is stripped of a lot of meaningful tax relief," he said.

Sen. Edward Kennedy (D-Mass.) a long time advocate for a minimum wage increase, said in a release, "I'm glad that we've been able to agree on a smaller tax package than the Senate-passed bill. I don't believe we need to load on more tax breaks for business before we can give Americans a raise."

The wage and tax package has been added to a $100 billion Iraq war funding bill that President Bush has threatened to veto because it contains language calling for withdrawal of most U.S. troops from Iraq by next March.

Lawmakers expect to take up the overall bill later this week, according to Senate Democratic aides.

After an expected veto, the minimum wage bill with the $4.8 billion tax package could be sent to the White House attached to other legislation or as a standalone bill now that key differences have been ironed out between the House and Senate.

President Bush and Senate Republicans have made small business tax breaks a condition for supporting a minimum wage increase.

The minimum wage bill provides for a gradual increase of the minimum wage from $5.15 an hour to $7.25 an hour over two years. The last time lawmakers increased the federal minimum wage was in 1997.

A minimum-wage hike would directly affect 5.6 million workers currently earning under $7.25 an hour, according to the labor-backed Economic Policy Institute.

The hike also could increase the wages of another 7.4 million workers who earn just above the current federal minimum, the group said. Currently, 28 states and Washington, D.C. already have a higher minimum wage. And a number of those states have indexed their minimum wage to inflation. Top of page