Senate Democrats Kill Wage, Estate-Tax Bill

Senate Democrats have blocked legislation that would have raised the minimum wage. Though the federal minimum wage hasn't been raised in a decade, Democrats would not support the bill because it also would have permanently cut estate taxes.

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This is MORNING EDITION from NPR News. I'm Renee Montagne.

In the Senate last night, Democrats frustrated a Republican bid to pass two controversial measures at once: a minimum wage increase and a permanent cut in the estate tax. Democrats have long advocated a higher minimum wage, but said the estate tax reduction was too much to swallow along with it.

NPR's Brian Naylor reports.

BRIAN NAYLOR reporting:

The minimum wage/estate tax union was a marriage made not in heaven but in the offices of Republican leaders. They believed they had out-foxed Democrats, as one Republican congressman put it, by combining two economically disparate measures into one irresistible package. Democrats would get what they wanted - the first minimum wage increase in 10 years - and Republicans something they wanted - slashing the estate tax, or death tax, as they call it.

Senate Majority Leader Bill Frist also wanted to rebut the charge that this has been a do-nothing congress.

Senator BILL FRIST (Republican, Tennessee): That's why we're taking up the death tax once again, and that's why we're extending key tax relief provisions for another two years, and that's why we're raising the minimum wage. We're not doing nothing. We're doing something about issues that concern everyday, hardworking Americans all across this nation.

NAYLOR: Frist's mention of extending tax provisions was a reference to popular tax credits that might expire without this bill. Because the bill would have lumped these with the estate tax and minimum wage, the total package has become known around the Capitol as the trifecta. Senate Democratic leader Harry Reid had a more pejorative term.

Senator HARRY REID (Democrat, Nevada): Is this the legacy of the Republican majority? To spend all of our time on repealing the estate tax and threatening - threatening - Democratic senators, Republican senators and the American people - either do it with the defecta bill, or we're not gonna do anything.

NAYLOR: Though the measure was approved in the House early last Saturday morning with help from some Democrats, the opposition leaders in the Senate worked hard to keep their members in line. As much as they wanted to raise the minimum wage, they said the estate tax cut was a poison pill that would cost the Treasury $268 billion over the next 10 years.

Democrat Hillary Clinton of New York called it a case of bait-and-switch.

Senator HILLARY CLINTON (Democrat, New York): There are things in that package of bills that every one of us would sign on to. But we're not gonna sign on to a deceptive minimum wage that would actually lower the incomes of thousands and thousands of workers in states across our country.

NAYLOR: Clinton was referring to a provision of the bill affecting the tip income of restaurant workers and others in seven states. The non-partisan Congressional Budget Office and the Congressional Research Service both said the bill would mean a pay cut for workers in those states.

Republicans countered with a statement from the Labor Department that it meant no such thing. Here's Minnesota Republican Norm Coleman.

Senator NORM COLEMAN (Republican, Minnesota): Some of my Democratic colleagues are now arguing that the tip credit provision would actually lead to a reduction in the minimum wage for those workers in non-tip credit states. It is interesting that these colleagues of mine are making this argument at a time when we are close to providing an increase in the minimum wage.

NAYLOR: The bill had other, more specific sweeteners - timber tax credits targeting Washington State's two Democratic senators, money for coal mine safety and clean-up aimed at West Virginia's two Democrats. The list of goodies actually gave one Democrat who wanted to vote for the bill a reason to hold back. Ben Nelson of Nebraska said he wanted to know what else the measure contained.

Senator BEN NELSON (Democrat, Nebraska): But it's what's outside the bill that I don't know about that I want to know about. I might not have a problem with that either. The problem is when you don't know what you don't know, it makes it a real challenge to make a decision.

NAYLOR: In the end, the minimum wage estate tax bill won support from just four Democrats while two Republicans voted no, leaving majority leader Frist several votes shy of the 60 votes he needed to advance the measure. Now Republicans are wondering who got out-foxed.

Brian Naylor, NPR News, the Capitol.

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A Primer on the Federal Minimum Wage

Federal Minimum Wage Rates i i

hide captionThe current minimum-wage rate of $5.15 — increased from $4.75 in 1997 — has remained static for almost a decade.

Jeremy VanderKnyff,NPR/U.S. Department of Labor
Federal Minimum Wage Rates

The current minimum-wage rate of $5.15 — increased from $4.75 in 1997 — has remained static for almost a decade.

Jeremy VanderKnyff,NPR/U.S. Department of Labor
Real Value of Minimum Wage i i

hide captionSince the last federal increase in September 1997, the purchasing power of the minimum wage — after accounting for inflation — has deteriorated by 20 percent.

Jeremy VanderKnyff,NPR/Economic Policy Institute
Real Value of Minimum Wage

Since the last federal increase in September 1997, the purchasing power of the minimum wage — after accounting for inflation — has deteriorated by 20 percent.

Jeremy VanderKnyff,NPR/Economic Policy Institute

The minimum wage is of maximum importance when it comes to welfare reform and poverty reduction. Learn more about how the value of an honest day's work is measured in the United States.

What is the minimum wage?

The federal minimum wage is $5.15 per hour for covered nonexempt employees. The Fair Labor Standard Act spells out who is and isn't exempt from the minimum-wage requirement.

Many states have their own minimum-wage laws. If an employee is subject to both federal and state minimum-wage laws, the higher of the two minimum wages applies.

Minimum-wage exceptions apply to workers with disabilities, full-time students, employees who receive tips, student-learners, and people younger than 20 during the first 90 days of their employment.

What about workers who receive tips?

Employers are required to pay their tipped employees $2.13 per hour in direct wages, if the following three conditions are met:

*The amount plus tips received equals the federal minimum wage or more.

*The employee keeps the tips.

*The employee regularly gets more than $30 a month in tips.

If an employee's tips plus direct wages do not equal the federal minimum hourly wage, the employer must make up the difference.

How often does the federal minimum wage increase?

The minimum wage does not increase automatically. In order to raise the minimum wage, Congress must pass a bill which the president signs into law.

Why has a federally mandated minimum-wage increase taken so long?

Congress has been slow to raise the minimum wage because many business groups are opposed, and many economists believe that increasing the wage will cause some jobs to disappear. The mainstream view is that increases in the minimum wage come with a price: fewer minimum-wage jobs.

How are states handling minimum-wage rates?

Across the country, states are debating minimum-wage rates. Many are raising the minimum wage through legislative action and ballot initiative. So far, 28 states and the District of Columbia have enacted minimum wages greater than those put in place at the federal level.

Since the last federal increase in September 1997, from $4.75 to $5.15, the purchasing power of the minimum wage — after accounting for inflation — has deteriorated by 20 percent. Adjusted for inflation, the value of the minimum wage is at its lowest since 1955. This year, state legislatures in Arkansas, Maryland, Michigan, North Carolina, and Pennsylvania raised their minimum wages above the federal level for the first time. Maine, Delaware, and Rhode Island — all states with minimum rates already above the federal level — passed additional increases this year.

Who benefits from the proposed minimum wage hike?

A lot of people would benefit from a minimum-wage increase, and not just those who work at minimum-wage jobs. There are millions of people who work for wages just above the hourly minimum who also would benefit.

Eleven percent of the work force, or an estimated 14.9 million workers, would receive an increase in their hourly wages if the minimum-wage rate were raised from $5.15 to $7.25 by 2008.

Among workers likely to benefit from the wage increase, 59 percent are women. Nine percent are single parents.

A wage increase benefits low-income families. Among families with children, the low-wage worker contributes, on average, more than half of the family's earnings. Forty-six percent of such workers contribute 100 percent of their family's earnings.

Who would be negatively impacted by the proposed wage increase?

Some low-skilled workers would likely see their jobs disappear. And there is another group that's hard to pinpoint: jobs that would have been created at $5.15, but won't be created at $7.25.

Whether the missing jobs disappear or never get created, it's primarily younger workers who are affected. Teenagers, dropouts and workers who only have a high school diploma — anyone who doesn't bring at least some specialized skills to the workplace could be hurt. Of course, they could also be helped. That's why an increase in the minimum wage is controversial.

Sources: U.S. Department of Labor; Economic Policy Institute; NPR News

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