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Small biz praises tax relief
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March 10, 2000: 1:07 p.m. ET
Minimum wage bill includes many breaks long sought by small companies
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NEW YORK (CNNfn) - Many small business owners and advocates were torn on Friday, unable to decide whether to be angry with the House of Representatives for passing a minimum wage hike or to praise legislators for finally giving them the tax relief they have been seeking.
"By and large, they passed a pretty good tax bill," said David D'Onofrio, government affairs manager at National Small Business United. "But the minimum wage increase is really short-sighted."
Tax breaks to offset the pain
Most political watchers focused on the provision hiking the minimum wage to $6.15 over two years. But also included are a number of tax breaks that small business groups have said would help them compete in this increasingly competitive business environment.
The single largest item in the tax package is a gradual reduction in the estate tax. Democrats criticized the measure, calling it a windfall for high-income individuals, but small business groups called that characterization "dead wrong."
"What this does is help people like Ben Williams, one of our members in Ohio, who wants to pass his auto body shop to Ben Jr.," D'Onofrio said. "This is a really important issue for small business owners."
The bill also makes health insurance premiums for self-employed people fully tax deductible this year. According to the Cato Institute, 44 percent of uninsured people are owners of companies with fewer than 50 employees. Many have chosen not to cover themselves because it is simply too expensive.
In addition, the measure repeals a tax provision that requires small business owners who sell their companies pay tax on the entire values of the sale in the same year they sell, even if they employ a technique called seller financing. Passed last December, the provision was a problem for many small business owners because most structure the sales of their companies so the buyer makes installment payments over a period of years.
The package also would gradually increase the 401(k) contribution limit and make other pension changes and increase the amount of business meals that could be deducted.
Dan Danner, senior vice president of federal public policy at the National Federation of Independent Business, praised the passage of the tax relief for small business owners.
"The tax relief in this bill will help ease the pain Washington inflicts on small business owners every day," he said.
Too much, too fast
On the issue of the minimum wage, however, small business groups were infuriated the House voted in favor of the $1 increase to be phased in over two years. Republicans originally proposed that wages be gradually increased over a period of three years.
The bill passed Thursday will increased the current minimum wage in two steps. The first 50-cent increase, to $5.65 an hour, will take place on April 1. The second bump, to $6.15 an hour, is set for April 1, 2001.
D'Onofrio said the initial increase, in just about three weeks, is too quick for most small business owners.
"People have not budgeted for this. It is incredibly short-sighted of the House to do this because it's too much for small business owners who have not planned for it," he said.
Minimum wage earners now make about $10,700 a year. Raising their wages to $6.15 an hour would increase their annual earnings by about $2,000.
Presidential veto is possible
Last month, the Senate approved a $1 wage increase over three years that included $76 billion in tax breaks over 10 years. Negotiators from the House and Senate now must reconcile the competing versions before sending a final bill to the president.
Clinton has threatened to veto the bill because it repeals some overtime protections, and provides tax breaks that he said use up too much of the projected budget surplus. 
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