An Estate Tax Twist Reverses Party Roles On Minimum Wage

Sens. Hillary Rodham Clinton, far left, and Charles E. Schumer join Sen. Edward M. Kennedy as he discusses the bill.
Sens. Hillary Rodham Clinton, far left, and Charles E. Schumer join Sen. Edward M. Kennedy as he discusses the bill. (By Win Mcnamee -- Getty Images)

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By Jeffrey H. Birnbaum
Washington Post Staff Writer
Thursday, August 3, 2006

For years, organized labor has worked hard to raise the minimum wage, while business groups have campaigned to block such a change. This week in the Senate, however, the AFL-CIO is pushing to kill the wage increase while practically the entire business lobby is demanding that it pass.

The reversal is the product of election-year politics and clever -- critics say devious -- legislative packaging that has been dubbed the "trifecta." In the same bill, senators are being asked to raise the minimum wage (the liberals' goal), cut the estate tax (the conservatives' objective) and approve a laundry list of popular, though narrowly targeted, tax breaks.

"The sides have flipped," said Peter R. Orszag, an economics scholar at the Brookings Institution.

Prodded by moderate Republicans eager to undercut criticism by Democrats that GOP economic programs overwhelmingly favor the rich, the House approved the package last week, including a three-year phased-in boost in the nation's minimum allowable hourly wage to $7.25 from the current $5.15. It would be the first increase in the minimum wage in nine years.

The Senate intends to vote on the package this week, but the outcome is too close to call, lawmakers from both parties agree. Several Republican committee chairmen are unhappy with how the House GOP leadership stitched together the bill, and they may raise objections on the floor. But the biggest obstacle to passage is the strong opposition from Democratic leaders and their labor-union allies to the estate tax provision, which would permanently reduce the federal levy on estates left by the wealthiest Americans.

Labor officials say that their opposition is a matter of economic and social justice. They also say that reduced revenue from estate tax relief could lead to cuts in federal programs for the poor, such as food stamps.

"We don't think minimum-wage workers should have to wait for millionaires to get another tax cut before they receive a long-overdue pay increase," said Bill Samuel, the AFL-CIO's legislative director.

In contrast, business lobbyists are seeking "yes" votes. Dan Danner, executive vice president of the National Federation of Independent Business, the small-business lobby, sent lawmakers a letter of support this week.

"While we have strong concerns about the minimum wage hike, we're supportive of permanent relief of the estate tax," he wrote. "If Congress needs to address the federal minimum wage level this year, we believe it should be addressed in a package that also provides significant relief for small businesses. . . . The bill does just that."

Other longtime opponents of a minimum-wage increase who are now eagerly backing it as part of the larger bill include the U.S. Chamber of Commerce, the National Association of Manufacturers and the National Association of Wholesaler-Distributors. The Tax Relief Coalition, which represents 1,000 business groups, also supports the plan.

Even the National Restaurant Association, which is among Washington's most entrenched nemeses of a minimum-wage boost, is debating what to do. "We are reserving the right to determine our position on the final package depending on the size of the wage increase and how much help small businesses get," said Steven C. Anderson, president of the association.

Business organizations have long opposed minimum-wage increases, arguing that the higher labor costs would force employers to lay off workers or eliminate some low-paying entry-level jobs. Opponents also say that prosperity is best generated by stronger economic growth rather than a mandated wage increase.


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