Senior Democrats are abandoning a backup plan to increase the minimum wage through a corporate tax penalty, after encountering numerous practical and political challenges in drafting their proposal over the weekend, according to two people familiar with the internal deliberations.
After that decision, Senate Finance Chair Ron Wyden (D-Ore.) and Senate Budget Chair Bernie Sanders (I-Vt.) said they would instead seek to add tax penalties on large corporations that fail to pay $15 an hour — an idea viewed as less likely to be struck down by the parliamentarian and still helpful to some minimum-wage workers.
But now senior Democrats — including Wyden and Sanders — are walking away from that backup effort, according to two people who spoke on the condition of anonymity to share internal discussions.
Economists and tax experts have said that the tax outlined by Sanders and Wyden could be easily avoided and difficult to implement, with large corporations able to reclassify workers as contractors to avoid potential penalties. “I would be extremely nervous about trying out a brand new idea like this with virtually no vetting,” Jason Furman, a former Obama administration economist, said on Twitter on Friday.
Wyden and Sanders were also expected to face an uphill battle in persuading the entire Senate Democratic caucus to support a proposal they would have only days to draft. The White House has not indicated support for the corporate tax penalty idea.
The House on Saturday passed the stimulus bill, including the measure to increase the minimum wage to $15. It’s not clear exactly how the Senate will proceed, although the White House has ruled out overturning the parliamentarian’s ruling.
Democrats have said they will seek to include the $15 minimum-wage proposal in a separate legislative package to be advanced later in Biden’s administration. It remained unclear how they would do so or how they would overcome the obstacles that prevented them from securing the provision in the current stimulus plan.
White House press secretary Jen Psaki said on “Fox News Sunday” of Biden’s commitment to raising the minimum wage: “We’re going to have to spend the next several days or even weeks figuring out what the best path forward is, but he’s committed to doing that.”
Democrats’ retreat from the backup leaves uncertain whether the stimulus plan will have any measures to directly raise the pay of minimum-wage workers, a long-standing priority of the party and Biden. Democratic leaders agree they want to have Biden sign the stimulus into law before unemployment benefits expire for millions in mid-March, meaning there is little time for an alternative plan to emerge.
The United States has never gone longer without raising the federal minimum wage in the history of the eight-decade law. Sanders has said he will seek other measures for approving a $15-an-hour minimum wage.