Republicans muscled the first minimum wage increase in a decade through the House early Saturday after pairing it with a cut in inheritance taxes on multimillion-dollar estates.
Combining the two issues provoked protests from Democrats and was sure to cause problems in the Senate, where the minimum wage initiative was likely to die at the hands of Democrats opposed to the costly estate tax cuts. The Senate is expected to take up the legislation next week.
Still, GOP leaders saw combining the wage and tax issues as their best chance for getting permanent cuts to the estate tax, a top GOP priority fueled by intense lobbying by farmers, small business owners and super-wealthy families such as the Waltons, heirs to the Wal-Mart fortune.
“This is the best shot we’ve got; we’re going to take it,” said House Majority Leader John Boehner, R-Ohio. The unusual packaging also soothed conservatives angry about raising the minimum wage over opposition by GOP business allies.
The House passed the bill 230-180 before leaving for a five-week recess.
Dems in Senate vow to kill bill
Senate Minority Leader Harry Reid, D-Nev., vowed Democrats would kill the hybrid bill, along with its 10-year, $300 billion-plus cost.
“The Senate has rejected fiscally irresponsible estate tax giveaways before and will reject them again,” Reid said. “Blackmailing working families will not change that outcome.”
Republicans countered that Democrats opposed the bill to keep the issue alive for the November elections.
But Republicans also reveled in putting moderate Democrats in the uncomfortable position of voting against both the minimum wage increase and the estate tax cut — and an accompanying bipartisan package of popular tax breaks, including a research and development credit for businesses and deductions for college tuition and state sales taxes.
The GOP package would increase the wage from $5.15 to $7.25 per hour, phased in over the next three years.
Under current law, the estate tax is phased out completely by 2010, but jumps back to 55 percent on estates larger than $1 million in 2011.
The bill passed Saturday would exempt $5 million of an individual’s estate, and $10 million of a couple’s, from estate taxes by 2015. Estates worth up to $25 million would be taxed at capital gains rates, currently 15 percent and scheduled to rise to 20 percent. Tax rates on the remainder of larger estates would fall to 30 percent by 2015.
The maneuver was aimed at defusing the minimum wage increase as a campaign issue for Democrats while using the popularity of the increase to achieve the Republican Party’s longtime goal of permanently cutting estate taxes.
That left Democrats fuming.
“Just think of what it is to have a bill that says to minimum wage workers, ‘We’ll raise your minimum wage but only if we can give an estate tax cut to the 7,500 wealthiest families in America,”’ said Minority Leader Nancy Pelosi, D-Calif.
Besides the 10-year, $268 billion cut to the estate tax, the measure contains $38 billion in other tax cuts that enjoy widespread backing, such as the research-and-development tax credit.
As part of the plan, Congress would also pass a bill shoring up the U.S. pension system. That bill easily passed the House Friday night and seemed more likely to succeed in the Senate than the minimum wage-estate tax plan.
Senate Majority Leader Bill Frist, R-Tenn., was a driving force behind the plan, overruling Finance Committee Chairman Charles Grassley, R-Iowa, who wanted to couple the business tax breaks with the pension overhaul bill.
The No. 2 Democrat in the House, Steny Hoyer of Maryland, said the move by GOP leaders — who actually oppose the minimum wage increase — was a cynical exercise to give political cover to GOP moderates while ensuring the wage increase does not become law.
“They want on the one hand to appear to be doing something and on the other make sure that it doesn’t happen,” Hoyer said.
Republicans countered that it was only fair to business interests opposed to the wage to reward them with estate tax relief and other tax cuts. And they said adding the estate tax was the only way to get their Senate GOP counterparts — who rejected a minimum wage increase just last month — to vote for it.
“The Republicans in the Senate have twice defeated this,” said Steve LaTourette, R-Ohio. “You know what? If the Senate wants the estate tax and the (tax cut) extenders, they’ve to give us the minimum wage. That’s how it’s going to become law.”
LaTourette organized a drive by almost 50 rank-and-file Republican lawmakers to persuade House leaders to schedule the wage measure for debate. Democrats have been hammering away on the minimum wage issue and have public opinion behind them.
It was during the campaign year of 1996 that Congress last voted to increase the minimum wage. A person working 40 hours per week at minimum wage makes $10,700, which is below the poverty line for workers with families.
Inflation has eroded the minimum wage’s buying power to the lowest level in about 50 years. Lawmakers have won cost-of-living wage increases totaling about $35,000 for themselves over the last 10 years.
GOP lawmakers feared being pounded with 30-second campaign ads over the August recess that would tie Congress’ upcoming $3,300 pay increase with Republicans’ refusal to raise the minimum wage.