A deal is set on minimum wage hike

WASHINGTON -- The first federal minimum wage hike in a decade will boost starting pay for hourly workers from $5.15 to $7.25 an hour under an agreement between congressional Democrats, a deal that couples the increase with nearly $5 billion in business tax cuts to draw political support from Republicans.

The pact, which could come up for a vote within days, would add $2.10 an hour to starting wages over the next two years, in addition to extending and expanding the reach of a range of tax breaks for businesses. President Bush has indicated that he would support a higher minimum wage as long as provisions such as tax cuts are included to lessen the burden on small businesses, many of which would see their labor costs rise.

Senator Edward M. Kennedy, the lead sponsor of the minimum-wage bill, said he would rather have raised the minimum wage without any tax cuts. But he said he recognizes the political reality of pairing tax breaks with the first increase in the minimum wage since 1997.

"After a decade of struggle, fairness and decency finally are winning out for 13 million hard-working Americans who have been waiting too long for a raise," said Kennedy, Democrat of Massachusetts, who is chairman of the Senate committee that oversees labor issues.

Final passage of the measure will allow Democrats to make good on a key campaign promise from last fall's elections. The House overwhelmingly approved a higher minimum wage just days after Democrats took control of Congress in January, but Senate Republicans threatened to block any measure that did not include tax cuts.

Though the Senate initially approved tax cuts worth about $12 billion over five years, House negotiators wanted less than $2 billion. The final figure, $4.84 billion, includes several provisions, including giving expanded tax breaks to restaurants and other small businesses that hire disabled veterans and residents of poor neighborhoods as well as allowing small businesses to write off a greater portion of their investments for tax purposes.

Charles B. Rangel, the House Ways and Means chairman whose committee oversees tax policy, praised the deal as a way to promote job growth and ensure that the nation's lowest-paid employees earn more. About 5.6 million workers currently earn less than $7.25 an hour; an estimated 7.4 million workers earn slightly more than that and could receive a pay increase as a result of a change to the minimum wage, according to the Economic Policy Institute, a labor-backed research group.

"This package provides common-sense, responsible tax relief so our small businesses can continue to hire new workers and promote economic growth in our communities," said Rangel, a New York Democrat.

While the agreement makes final passage a near certainty, some Republicans continue to oppose the measure. Senator Charles E. Grassley of Iowa denounced the final tax cut package as a "shriveled peanut," and blasted Democrats for giving insufficient attention to closing other tax loopholes.

"The [tax] relief was supposed to be contemporaneous with the wage increase so small businesses wouldn't cut jobs," said Grassley, the ranking Republican on the Senate Finance Committee. "This package is stripped of a lot of meaningful tax relief."

The top Republican tax writer in the House, Representative Jim McCrery of Louisiana, is also against the bill, saying that it does not adequately give tax relief to the businesses most likely to be affected by a higher minimum wage.

Many members of both political parties have for years said they favored an increase in the minimum wage, which has been frozen at $5.15 an hour since September 1997 -- the longest period without an increase since the standard was first established in 1938. Inflation has eroded the minimum wage's purchasing power to its lowest level in more than 50 years, according to the Center on Budget and Policy Priorities.

Yet in recent congressional sessions, political maneuvering has stymied any movement. Typically, Republicans would band together to defeat Democratic proposals, calling them antibusiness, and Democrats would block GOP proposals to tie a wage increase to probusiness labor laws or tax policy.

Democrats faced similar hurdles this year : Their talks with the GOP had stalled for months as liberal party members argued against more tax breaks for businesses. But they reached an agreement over the weekend that broke the logjam and could draw enough Republican support to pass.

"It's past time to get a pay increase on the ground for America's minimum-wage workers," Senate Finance Committee chairman Max Baucus , a Montana Democrat who has advocated business tax cuts, said in a statement.

Twenty-eight states and the District of Columbia already have higher minimum wages than federal law requires. The Massachusetts minimum wage is $7.50 an hour, so the current bill will have no impact on Bay State paychecks.

Democratic leaders moved yesterday to attach the minimum-wage measure to an already controversial bill providing additional funding for the Iraq war, in an effort to move the legislation as quickly as possible. The Iraq bill, which ties money for the war to a timetable for Bush to begin withdrawing troops, is set for a vote this week.

If the president vetoes that bill, as expected, Democrats say they will attach it to another measure, or send Bush a stand-alone minimum-wage bill with the same provisions.

A White House spokesman, Tony Fratto, declined to comment specifically on the bill yesterday, but reiterated the president's support for a minimum-wage increase that includes some provisions for small businesses.