Workers Held Hostage

Wednesday, January 31, 2007

THE FEDERAL minimum wage hasn't been raised in a decade. During that time, businesses have received $276 billion in tax cuts. Another $36 billion has been directed specifically toward small businesses. The administration boasts -- though its numbers are overstated -- that, for 2006, 25 million small-business owners will receive an average tax cut of $3,641. So why, you might wonder, are President Bush and Republican lawmakers insisting that even more tax cuts be lavished on small-business owners as the price for approving a $2.10 increase in the minimum wage, from $5.15 to $7.25 an hour, in three steps over two years? The measure on the verge of being passed by the Senate would direct another $8.3 billion in such tax cuts over 10 years to small businesses, supposedly to offset the costs of the wage hike.

Without the tax breaks, the wage hike cannot pass the Senate's 60-vote hurdle for cloture, strategists on both sides insist. Meanwhile, the House version -- it passed 315 to 116, with 82 Republican votes in favor -- does not include tax breaks.

If the tax breaks are warranted, they should be granted as part of a larger review of tax policy -- not as a ransom for raising the minimum wage, now at its lowest level, adjusted for inflation, in half a century. It's good that the Senate has found other tax changes to pay for the cuts, but with the Democrats' commitment to pay-as-you-go rules, those kinds of offsets are going to be harder and harder to find; these could be used for other, perhaps more worthy, causes than another business tax break. To the extent that small businesses need help, the cuts are poorly targeted. For example, one provision would increase from $5 million to $10 million the threshold for businesses to be permitted to use cash accounting; a business grossing more than $5 million hardly sounds like a mom-and-pop shop.

The House got it right. It should stand firm -- and dare Senate Republicans and the president to block the long-overdue increase.


© 2007 The Washington Post Company