Bargaining Minimum Wage Hike for Tax Cuts
Washington Post Staff Writer
Tuesday, September 28, 1999; Page A4
With the Republicans' $792 billion tax bill officially dead, lawmakers and lobbyists for business interests are looking to a bill boosting the minimum wage as their best vehicle for achieving significant tax relief this year.
Republicans had previously promised to provide help to small businesses most affected by a wage boost, following the same approach they adopted in 1996 when they raised the minimum wage from $4.25 to $5.15 an hour. Now lawmakers are considering broader measures, including pension reform and eliminating the estate tax, which could transform a relatively modest bill into a much more ambitious package.
"Instead of having a spoonful of sugar to help the medicine down, some of our members would like a wheelbarrow of sugar," said Trent Duffy, spokesman for House Ways and Means Committee Chairman Bill Archer (R-Tex.). "That's why some of our members are talking boldly about attaching major tax relief to the minimum wage increase."
Rep. Gary A. Condit (D-Calif.), one of the leaders in the effort to raise the minimum wage by more than $1 over four years, said "everyone's throwing everything but the kitchen sink" into the mix of proposals under consideration.
"We're looking at targeted tax cuts that would make small business able to live with and better accept a minimum wage increase," Condit said. "We want to be realistic and not overreach, but if members are interested in a larger-scale package, we certainly would consider that."
GOP leaders are not happy about the prospect of a minimum wage increase, but with momentum against them, they are hoping for a compromise that would dispose of the issue before the election year. Democrats are eager for a vote, having identified the minimum wage as one of their top legislative priorities.
Lee Culpepper, vice president for the National Restaurant Association, expressed concern that larger tax breaks could obscure the need to help small business. "The tax relief, in large part, should be targeted towards those businesses [that] will bear the burden of the wage increase," he said. "People realize this tax bill is leaving the station, and it may be the last tax bill for this year or perhaps the next two years. They're going to start coming out of the woodwork with their tax proposals."
Among Culpepper's top priorities is increasing the business-meal deduction for small businesses from 50 to 80 percent, at an estimated cost of $11.6 billion over a decade. Extending the Work Opportunity Tax Credit, which is aimed at entry-level workers and would cost $2 billion over five years, is also popular with lawmakers, along with providing 100 percent deductibility for health care expenses for small businesses, a $3 billion proposal over five years.
Some lawmakers have more ambitious plans. Rep. Neil Abercrombie (D-Hawaii) wants to make spousal travel on business trips tax-deductible and increase the deduction for performing-arts tickets from 50 to 80 percent, a benefit applying to hula festivals and Broadway plays alike. The spouse deduction would cost the Treasury less than $50 million a year, and the ticket deduction would cost $371 million over 10 years.
"Obviously this would be terrific for Hawaii, but I'm trying to sell it to other members that this will be universal in its appeal," Abercrombie said, noting that 60 U.S. cities have convention centers. "There's no such thing as a Republican travel district or a Democratic travel district."
Senate Majority Leader Trent Lott (R-Miss.) is prepared to offer his own set of tax breaks when the issue comes to the Senate floor, according to aides, and is likely to include the health insurance deduction as well as a tip credit provision in his plan.
The future of many proposals will depend on the final size of the package: Government officials estimate the wage increase could cost businesses $18 billion over five years, and lawmakers are anxious to offset those costs. Several Democrats and Republicans have suggested reducing inheritance taxes as part of a wage increase, but phasing out that tax would cost $65 billion over 10 years.
Business groups, which already oppose a Democratic proposal to raise the wage by one dollar over two years, remain uneasy at the prospect of boosting it even higher over a more extended period. Culpepper described such an increase as "a deal breaker."
Still, businesses are continuing to make their pitch before members like Rep. Jack Quinn (N.Y.), the leading GOP proponent of the wage hike. Last week Washington lobbyist Mark Isakowitz brought in a representative from Tricon Global Restaurants--which owns Taco Bell, Kentucky Fried Chicken and Pizza Hut--along with a Taco Bell franchise owner from Alabama to tell Quinn they were more interested in the Work Opportunity Tax Credit than a business-meal deduction.
"They said lobbyists don't come in and take people to lunch at our places," Quinn recalled. "I said, 'That's what my problem is, I've been taking lobbyists to lunch at Burger King.' "
© 1999 The Washington Post Company