GOP Bid On Wages, Estate Tax Is Blocked

Rejecting the measure will be easy to explain "when you have all of labor saying they don't like it," said Sen. Robert Menendez (D-N.J.), who is campaigning to keep his seat in November. "It comes down to taking care of a lot of wealthy people" whose estate tax reductions would have prompted reductions in social spending, he said. By one estimate, the plan would have lowered federal tax revenue by $268 billion over 10 years.

Gerald W. McEntee, president of the American Federation of State, County and Municipal Employees (AFSCME), said, "This was a transparent attempt to dangle a minimum-wage increase for families struggling to make ends meet to secure yet another Texas-size tax handout for the wealthiest."

For days, debate on the wage-and-tax bill played out in news conferences and closed meetings while Senate floor action focused on a military spending measure. Much talk centered on the impact that the minimum-wage proposal would have had on people in seven states who work mostly for tips.

In 43 states, workers who receive tips can be paid as little as $2.13 an hour, provided that their tips bring them to at least the minimum-wage level. But seven states, mostly in the West, allow no such exemption. California, for instance, requires a minimum wage of $6.75 an hour for all workers, including bartenders and waitresses.

Senators differed on whether the legislation would force the seven states to drop their protection of tip-earners, and memos offered by various state and federal agencies did not resolve the question. Democratic leaders insisted that the seven states' laws would be overridden.

"Under the Republican bill, Paris Hilton and her family will get $250 million, while the tipped workers in Hilton hotels will lose up to $5.50 an hour," said Sen. Edward M. Kennedy (D-Mass.).

The seven states include Washington, whose Democratic senators -- Maria Cantwell and Patty Murray -- were among those Frist had hoped to win to his side. But they cited the tips issue in announcing their opposition to the bill.

After the vote, Frist said senators had lost "the chance to bring three very important issues to the floor for debate: permanent death-tax relief, extension of expiring tax provisions and a minimum-wage increase of more than 40 percent." He called the matters "vital to the economic security of everyday Americans."

Sen. Mark Pryor (D-Ark.), whom Frist's allies had wooed without success, said he wants to raise the minimum wage, but not if it means such a deep cut in the estate tax.

"I cannot ignore our $300 billion deficit, and the ongoing costs to support the wars in Iraq and Afghanistan and reconstruction in the Gulf Coast," Pryor said in a statement. He said that he would back a more modest reduction that "would cover virtually every small-business owner and farmer in Arkansas."

Staff writer Amy Goldstein contributed to this report.