http://www.washingtonpost.com/wp-dyn/content/article/2006/07/28/AR2006072800337.html?referrer=email
Minimum Wage Hike Passed By House
GOP Bill Also Cuts Estate Tax
By Jonathan Weisman
Washington Post Staff Writer
Saturday, July 29, 2006; Page A01
The House last night voted to boost the minimum wage for the first time in
nearly a decade while also permanently slashing the estate tax, a coupling that
GOP leaders calculated might garner enough Senate support to become law.
House lawmakers also approved the biggest overhaul of the nation's pension laws
in 30 years.
Supporters hold signs as they celebrate the passage of the "big box"
living wage ordinance after the Chicago City Council voted in favor of the
measure, Wednesday, July 26, 2006, in Chicago. The ordinance requires
mega-retailers with over $1 billion in annual sales and stores of at least 90,
000 square feet to pay workers at $10 an hour in wages and another $3 in fringe
benefits by July 1, 2010. (AP Photo/Nam Y. Huh) (Nam Y. Huh - AP)
In the rush to bolster their party's accomplishments before leaving today on a
five-week summer break, House Republican leaders effectively took a gamble. If
the Senate follows the House and passes legislation shoring up the pension
system, raising the minimum wage, permanently cutting the estate tax, and
extending such measures as a research-and-development tax credit, Republicans
can say they departed for the summer in a flourish of accomplishments.
But the maneuvering by House and Senate GOP leaders to package the measures
over the objection of some Senate chairmen caused severely bruised feelings.
Lawmakers from both parties said last night that the legislation could easily
collapse in the Senate, underscoring Democratic contentions that Congress has
become dysfunctional.
"It's a risk," said House Majority Leader John A. Boehner (R-Ohio), "but I
think it's the only way to proceed."
Democrats were incensed that the GOP leadership would couple the minimum wage
hike, the first increase since 1997, with an estate tax cut that would reduce
federal revenue by $268 billion over the next decade, to the overwhelming
benefit of the country's richest families.
"This is beyond cynical. This is disgraceful," said Rep. Jim McGovern (D-Mass.).
Senate Minority Leader Harry M. Reid (D-Nev.) signaled he would try to scuttle
the tax bill next week. "Republicans have made perfectly clear who they stand
with and who they are willing to fight for: the privileged few," he said.
But Republicans believed they had found a way to snatch the minimum-wage issue
away from Democrats, who had been using it as a cudgel, while securing passage
of a central plank of their economic program: all but eliminating the estate
tax.
"I know why you're mad," said Rep. Zach Wamp (R-Tenn.). "You've seen us really
outfox you."
The minimum wage and estate tax measure passed around 1:30 a.m., 230 to 180.
The pension bill passed earlier with bipartisan support, 279 to 131, and it is
seen as critical to more than 44 million Americans who receive traditional
defined-benefit pensions. The Labor Department has reported that companies have
underfunded their pensions by more than $450 billion, threatening to dump much
of their pension liabilities on the federal taxpayer.
The federal Pension Benefit Guaranty Corp., which insures traditional pensions,
reported a $22.8 billion deficit this year as companies such as bankrupt
airlines ditched their pension plans and left payouts to the PBGC. If that
deficit becomes too burdensome, a congressional bailout may be necessary.
To avoid that, the pension bill would have more than 30,000 companies increase
payments into their pension plans. Companies that switch to hybrid retirement
plans combining the fixed benefits of a traditional pension with the
market-driven returns of a 401(k) would receive legal protection from employees
who sue over the conversion. And companies such as Fidelity Investments that
offer 401(k) plans would, for the first time, be able to offer investment
advice to employees.
The estate tax and minimum wage bill proved far more contentious. Many
conservatives disagreed with the provision to raise the hourly minimum wage
from $5.15 to $7.25 over three years.
"Every principled conservative knows this is horrible stuff," Rep. Tom Feeney
(R-Fla.) said.
Democrats, meanwhile, overwhelmingly condemned the estate tax cut as a gift to
the rich that a government running a $300 billion budget deficit could ill
afford. Under the bill, estates worth $5 million -- or $10 million for a
married couple -- would be exempted from taxation. Inheritances above that
threshold and up to $25 million would be taxed at capital gains rates,
currently 15 percent. Estates worth more than $25 million would be taxed at 30
percent.
To make that the price for a minimum wage increase amounted to "legislative
extortion," said Rep. Earl Pomeroy (D-N.D.).
Some House Republican moderates hailed the legislation as a smart compromise
that would preserve an estate tax that Republican leaders have been trying to
eliminate since they came to power more than a decade ago. Once fully phased
in, the cost of that compromise, however, would reach $62 billion a year,
three-quarters the cost of full estate tax repeal.
To sweeten the deal for balking Democrats, especially in the Senate, GOP
leaders larded the tax bill with special-interest breaks. Over the strenuous
objections of Senate Finance Committee Chairman Charles E. Grassley (R-Iowa)
and Senate Health, Education, Labor and Pensions Committee Chairman Mike Enzi
(R-Wyo.), they stripped a package of popular business tax extensions from the
pension bill and added them to the estate tax cut.
Against the wishes of Senate Budget Committee Chairman Judd Gregg (R-N.H.),
they included a measure that would shift costs of health care and environmental
reclamation from coal companies to the federal government at a cost of nearly
$4 billion over the next decade. Another measure, aimed at Washington state's
two Democratic senators, would give timber companies a tax break worth $428
million over five years.
In total, the tax package would cost the Treasury nearly $310 billion through
2016.
The marrying of the minimum-wage boost with the estate tax cut and other tax
breaks, engineered by House Republican leaders and Senate Majority Leader Bill
Frist (Tenn.), stemmed from a highly unusual move that came at Grassley's and
Enzi's expense. The two had been leading difficult negotiations over the
pension bill over the past eight months.
But the final sticking point came over Grassley's insistence that the pension
bill contain a package of tax cut extensions such as the
research-and-development tax credit, a credit for hiring workers off welfare,
and a credit to promote wind energy. Frist and House Ways and Means Committee
Chairman Bill Thomas (R-Calif.) wanted to use those tax credits to entice
Senate Democrats to vote for their permanent estate tax cut. Grassley tried to
force a showdown Thursday night, calling a public meeting of negotiators and
daring House Republicans to vote to strip out the tax measures.
Instead, House Republicans boycotted the meeting. Then GOP leaders effectively
shut down negotiations and took the pension bill to the House floor without the
tax measures, infuriating Grassley.
"When my credibility is abused and used, I resent it," Grassley shouted
Thursday night, saying he had been "stabbed in the back."
To become law without another round of negotiations, the Senate will have to
pass the pension and tax measures exactly as they pass the House, a tall order
considering the ill will created in the past two days.
But Eric Ueland, Frist's chief of staff, said yesterday that he thinks the
leadership has found the combination of incentives to pass the hard-fought
measures, without procedural maneuvers that would send them back to square one.
[Non-text portions of this message have been removed]
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