WASHINGTON — A new tax bill tied to a minimum wage hike passed by the House Friday by a vote of 360 to 45 now needs to be reconciled with a Senate version that calls for much higher tax incentives for small businesses.
The House first passed a federal minimum wage hike without any tax breaks for businesses last month. But the Senate passed a bill that included $8.3 billion in tax cuts to offset the higher salary costs, which was added to the legislation in order to get bipartisan support. Democratic leaders in the House then crafted the new legislation, which provides $1.3 billion in tax breaks for companies.
Both bills raise the minimum wage rate for the first time in a decade to $7.25 an hour from $5.15 over two years and fulfill one of the first tests of the new Democratic majority in Congress.
The task of reconciling the two bills ultimately will be left to Senate Majority Leader Harry Reid (D., Nev.) and House Speaker Nancy Pelosi (D., Calif.), along with two committee chairmen, Sen. Max Baucus (D., Mont.) and Rep. Charles Rangel (D., N.Y.), and Republican leaders. They could forge a compromise behind closed doors and then send it to their respective chambers, or put it to a Congressional conference committee. The key is how far they can whittle down the tax cuts in the $8.3 billion Senate package before Senate Republicans threaten to vote against the compromise legislation.
In a public display of the sharp differences dividing Senate Republicans and House Democrats and a signal of the difficulties ahead, Sen. Chuck Grassley (R., Iowa) and Rangel squared off over the minimum wage and tax cuts on “The NewsHour With Jim Lehrer” Thursday night before the House vote on Friday.
Rangel, who accused the Senate Republicans of holding the minimum wage bill “hostage” to tax incentives, said: “In order to attempt to accommodate the senators, we are prepared…to send a small bill over to the Senate so that you can attach your $8 billion tax cut for business to it, which would at least afford us the opportunity to go into conference to try to work out our differences.”
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Grassley, who called Rangel’s remark unfair, said: “I think if he and I can sit down, we can reach some compromises and we can get a minimum wage increase of $2.10. We can get a lot of tax loopholes filled. We can bring in more revenue and we can help small businesses that sometimes are hurt by an increase in the minimum wage.”
The National Retail Federation, which originally opposed a straight wage increase, has said it will push for the Senate version of the bill. The NRF also supports the Senate bill because it would provide a change in depreciation rules for retailers.