By Thomas Ferraro
Thursday, February 1, 2007; 6:25 PM
WASHINGTON (Reuters) - The Democratic-led U.S. Senate voted overwhelmingly on Thursday to raise the federal minimum wage for the first time in a decade and provide billions of dollars in small-business tax cuts to help offset the cost.
Senate approval of the legislation, on a 94-3 vote, set up a showdown with the Democratic-led House of Representatives, which passed a bill last month to increase the minimum wage without Republican-demanded tax cuts.
The House and Senate must agree on a final bill before it can be sent to Republican President George W. Bush to sign into law. Democrats promised a minimum-wage hike during their successful campaign last year to win control of Congress.
Both House and Senate measures would give several million of America's poorest workers -- dishwashers, short-order cooks, laborers, maids -- a pay hike by boosting the minimum wage over two years to $7.25 from $5.15.
But the Senate bill also included $8.3 billion in small business tax cuts that were needed to clear a Republican roadblock.
Democratic Sen. Edward Kennedy of Massachusetts called passage of the proposed increase in the minimum wage "a victory for the American people" and key way to fight poverty.
At $5.15 per hour, the current minimum wage, a person working 40 hours per week makes $10,712 per year, about $5,000 below the poverty line for a family of three.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, said: "We look forward to working with the House of Representatives to send a final bill to the president that will be a victory for both those who earn the minimum wage and those who pay it."
Democrats admitted they were uncertain how they would resolve differences in the House and Senate bills, but vowed to do so.
Congressional analysts figured they would succeed.
"It's inconceivable a minimum-wage bill doesn't get to Bush's desk over the next two or three months," said Ethan Siegal of the Washington Exchange, a private firm that tracks Congress for institutional investors.
It has been nearly 10 years since the last increase, the longest period that the minimum wage has not been raised since it was created in 1938.
Republicans argued small business should be provided tax breaks to help pay for the wage increase, otherwise they would have to eliminate jobs.
Democrats said the increase would trigger no significant job loss, and noted business had received tens of billions of dollars in tax breaks the past decade.
They also noted that a recent Gallup Poll found that 86 percent small business owners do not think that the minimum wage affects their business, and nearly half think it should be increased. Most already pay more than the minimum wage.