Lawmakers OK Deal to Raise Minimum Wage

In a compromise, key House and Senate negotiators agreed Wednesday on a bill that would raise the minimum wage while also providing $9 billion in tax breaks for small businesses, allowing homemakers to establish tax-sheltered individual retirement accounts and offering a $5,000 tax credit for adoption expenses.

The agreement clears the way for Congress to enact a two-stage, 90-cent-an-hour increase in the minimum wage before lawmakers leave for a monthlong summer recess at the end of the week.

The compromise, which is expected to be approved by the House and Senate and signed by President Clinton, calls for raising the minimum wage from $4.25 to $4.75 on Oct. 1 and $5.15 on Sept. 1, 1997.

The bill, which raises the minimum wage for the first time since 1991, represents a victory for Democrats, who for months demanded action on the issue and put Republican leaders on the defensive for standing in their way.

“Minimum-wage workers have not had a raise in over five years,” said Sen. Edward M. Kennedy (D-Mass.). “At last, Congress is on the threshold of giving them the long overdue raise they need and deserve.”

But Republicans could claim a victory of their own in the tax cuts, which have been an important part of their agenda. However, those provisions, which may be the only significant revenue measure of the year, are a pale shadow of the $245-billion tax cut that Republicans sought last year.

The compromise on taxes--key to the fate of the bill--was negotiated by House Ways and Means Chairman Bill Archer (R-Texas) and Senate Finance Committee Chairman William V. Roth Jr. (R-Del.). It was approved by the House negotiators Wednesday night. Senate negotiators are expected to approve it and send it back to the House and Senate for a final vote.

GOP leaders said they hope to send the bill to the White House before the congressional recess begins Friday or Saturday. It is part of the heavy crush of legislative business before Congress this week.

An estimated 12 million people are expected to benefit from the wage increase, including 4 million who are earning the minimum wage and 8 million more who earn between $4.25 and $5.15 an hour. Senate Democratic analysts estimated that almost 11% of the work force in California would benefit.

The only question House-Senate negotiators needed to resolve about the wage increase was when it would begin. Democrats advocated a Sept. 1 date so it would take effect before Labor Day. But Republicans argued that businesses needed more time to prepare.

As for the tax provisions, the House bill included about $7 billion in tax breaks over eight years, much of it targeted at small businesses that were among the most vocal opponents of a minimum-wage increase. The Senate version included about $13 billion in tax breaks.

The price tag for the Senate bill nearly doubled, aides said, in part because by the time the bill reached the chamber, it had become clear that it would be the only significant tax bill to become law this year.

The compromise would cut taxes by $8.6 billion over five years, but would offset that with $9 billion in revenue-raising measures. They included a one-year reinstatement of an airline ticket tax that expired at the end of 1995 and the gradual elimination of a tax credit now provided to U.S. companies doing business in Puerto Rico.

Included among the new tax breaks for individuals is a Senate proposal on IRAs for homemakers. This provision would allow nonworking spouses to put $2,000 tax-free into retirement accounts. Now only working spouses can contribute that much. As under current law, the tax breaks would be unavailable to couples earning more than $50,000 a year.

The adoption tax credit, which had been approved by the House and Senate as separate pieces of legislation earlier this year, would provide $5,000 credits to offset the expenses of adopting a child. The credit would rise to $6,000 for handicapped children or those with “special needs.”

Negotiators also agreed to reinstate tax credits, which lapsed at the end of 1995, for research and development expenses and for companies that develop “orphan” drugs for rare diseases.

The small-business provisions, touted as a way to cushion the effects of the higher minimum wage, included a gradual increase in deductions small businesses could take for the purchase of new equipment and new pension rules to make it easier to set up a pension plan.

However, some of the tax breaks help some of the biggest corporations in America as well. One House proposal accepted by the Senate would make it easier for U.S. companies to escape income taxes by accumulating foreign earnings and leaving them invested overseas. Democrats complained that the provision, which reopened a loophole Congress closed in 1993, was indicative of GOP efforts to use the popular minimum-wage bill as a vehicle for ushering in questionable tax subsidies for business.

“What kind of presents are being loaded on this truck and for whom?” asked Sen. Byron L. Dorgan (D-N.D.).

But while the administration opposes many of those business tax breaks, Dorgan said, Clinton is unlikely to veto the bill because of them.