WASHINGTON — Tax breaks aimed at easing the burden of a minimum-wage increase on small businesses sailed through the Senate's tax-writing committee Wednesday.
The unanimous voice vote by the Senate Finance Committee paves the way for the full Senate to consider boosting the minimum wage to $7.25 over the next two years. The wage plan is next in line for debate after the Senate wraps up work on an ethics and lobbying overhaul.
But the committee's action drew protests from the House's No. 2 Democrat, who said it would "complicate and delay" passage of the minimum-wage increase. The House passed its version without any tax breaks for the small businesses, which typically employ the greatest number of minimum-wage workers.
The House also is guarding its right under the Constitution to initiate tax bills and says procedural gridlock might ensue if the Senate goes first.
"Minimum-wage earners have already waited nine years and four months for a raise. Congress should not make them wait any longer," said House Majority Leader Steny Hoyer, D-Md.
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In keeping with promises by Democratic leaders to accompany the tax cuts with balancing revenue increases, the measure would close tax loopholes and curb corporate tax shelters that have passed the Senate in recent years, only to die in the once GOP-dominated House.
The popularity of the wage increase meant easy approval of a narrowly written bill through the Democratic-run House. The bill would raise the wage in three steps, starting with an increase from $5.15 to $5.85 per hour.
In the notoriously balky Senate, however, Democratic leaders have opted to add the $8 billion in tax relief. That would help ease passage by avoiding a fight with business lobbyists and the possibility of a filibuster by minority Republicans.
"A minimum wage hike would likely not pass the Senate without small business tax relief," said Iowa Sen. Charles Grassley, the top Republican on the Senate Finance Committee.
The Senate's move probably will delay the minimum wage bill and has generated hard feelings between House and Senate tax writers.
House Ways and Means Committee Chairman Charles Rangel said the Senate is trampling on his chamber's right under the Constitution to initiate tax bills.
Rangel, D-N.Y., said the Senate must try to pass the bill as a stand-alone measure without the tax provisions.
"We're not going to accept a tax cut of $8 billion on our minimum wage bill," Rangel said. "It's a Senate problem."
House leaders want to avoid long delays in enacting the minimum wage increase. They are sending signals privately that they ultimately will accept some tax provisions rather than risk deadlock.
The Senate measure also would scale back the ability of corporate executives to postpone paying taxes on deferred compensation plans, limiting the amount of deferrable income to $1 million. This would raise $806 million over the next decade.
Rolling back the plans, which are popular with highly paid executives, led to objections from the business lobby.
All told, the Senate measure would provide about $8 billion in tax incentives for small business by extending the ability of small businesses to defray the cost of equipment purchases. It would allow restaurant and store owners — who typically hire many minimum wage workers — accelerated tax benefits on improvements to their facilities.
The measure would extend for five years the work opportunity tax credit. This gives businesses tax relief for hiring people that employers often are reluctant to take on — welfare recipients, ex-felons, the mentally and physically disabled and inner city youths, for example.
Under both the House and Senate bills, the minimum wage would rise to $5.85 an hour 60 days after it signed into law by the president; then to $6.55 an hour a year later; and to $7.25 an hour a year after that.
