Hikes Wages, Cuts Taxes, Looks Like a Dud

Times Staff Writers

On the eve of adjourning for a month of campaigning in their districts, House Republicans early today pushed through a controversial bill linking a minimum-wage increase to a package of tax cuts.

The hastily crafted measure almost certainly will die in the Senate, a prospect that several Republican lawmakers acknowledged even as they prepared to cast votes.

But the bill's 11th-hour path to the floor of the House of Representatives highlighted the parties' scramble to stake out positions in advance of the fall election campaign.

In the end, the measure passed 230-180, with 34 Democrats joining the Republican majority.

Democrats have been pushing for years for a provision that would raise the minimum wage.

And with congressional elections barely three months away, Democratic strategists were preparing to use the issue this fall in their bid to wrest control of Congress from the GOP.

Facing the prospect that they would be portrayed as obstacles on an issue popular with many voters, nearly 50 mostly moderate Republicans this week appealed to their leaders to act.

The group threatened to vote against adjourning for the August recess until their party's leaders agreed to give them a chance to vote on a minimum-wage hike.

On Friday afternoon, GOP House leaders relented.

They announced they had tacked it onto a 180-page bill that would cut the estate tax and extend a host of temporary tax cuts -- moves that Senate Democrats have made clear they would block through a filibuster if necessary.

Under the measure, the minimum wage would rise from $5.15 an hour to $7.25 in three 70-cent steps starting in January.

The maneuver linking the tax cuts to the wage increase outraged Democrats.

Rep. Jim McGovern (D-Mass.) said Republican leaders knew that the tax provisions would surely be killed in the Senate. He accused them of giving their moderate members a chance to go on record in favor of boosting the minimum wage without having to deliver results.

Rep. Chris Van Hollen (D-Md.) called it "the kind of cynical ploy that makes Americans lose faith in their government."

California is one of 18 states that enforce higher minimum wages than the federal $5.15. California's minimum is $6.75, a level that would be exceeded only with the last of the three increases in the federal minimum, which would occur in June 2009.

House Minority Leader Nancy Pelosi (D-San Francisco) accused the Republicans of a "political stunt" that insulted Americans, especially the 7 million who earn minimum wage.

But Rep. Zach Wamp (R-Tenn.) said Democrats were so angry only because they had been "outfoxed" by the GOP strategy of combining the minimum wage with the tax cuts.

The leadership sought to put the best face on the strategy.

"These are wonderful accomplishments: House Republicans showing results for the American people," said Rep. Deborah Pryce (R-Ohio), the fourth-ranking Republican in the House. "We didn't want to leave for August without accomplishing both of these."

Rep. Doris Matsui (D-Sacramento) said failure to boost the minimum wage would leave those earning it with less purchasing power than at any other time in the last 57 years.

Other Democrats said most minimum-wage earners were not making enough to live above the poverty line.

"These families work hard, [but] they are living in poverty," McGovern said.

Republicans replied that a higher minimum wage would force businesses to cut payrolls at the low end of their salary scales, thus doing low-wage workers more harm than good.

House Majority Whip Roy Blunt (R-Mo.) said he thought the tax cuts would make the medicine of the minimum-wage increase go down easier.

The most controversial tax provision would extend reductions in the estate tax indefinitely, but it would not eliminate the tax, as many conservatives have sought.

Under current law, estates of up to $2 million are exempt from the tax, and amounts over that are levied at a top rate of 46%. The exemption and top rate are scheduled to reach $3.5 million and 45% in 2009; the tax is to disappear in 2010, then revert to an exemption of $1 million and a top rate of 55% in 2011.

The provision before the House would reinstate the tax in 2010 with an exemption of $3.75 million and a top rate of 40%.

Further cuts would lift the exemption to $5 million and lower the top rate to 30% by 2015, after which the exemption would be indexed to inflation and the rate would remain 30%.

Other tax breaks, all of which expired this year and which the legislation would reinstated through 2007, include:

* Allowing deductions of up to $4,000 for higher education expenses.

* Allowing deductions for state and local sales taxes instead of state and local income taxes.

* Extending the research and development tax credit.

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