BW Online | August 31, 2000 | A Major Compromise over the Minimum Wage?

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AUGUST 31, 2000

STAFF & BENEFITS

A Major Compromise over the Minimum Wage?
In exchange for a $1-an-hour lift, the House GOP leadership is offering tax breaks for small business

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Can small businesses afford a higher minumim wage? The fate of a bill that for the first time since 1996 would give 10 million minimum-wage earners a salary hike, of $1 an hour in two stages over the next two years, could depend on the answer. In order to thaw out long-stalled negotiations over the bill, House Speaker J. Dennis Hastert (R-Ill.) is talking compromise with the Democrats. In exchange for raising the minimum wage to $6.15, he's offering tax breaks of roughly $76 billion, phased in over the next 10 years. The tax breaks, he says, will help small businesses afford the extra $1 an hour.

The tax breaks aimed at helping small businesses include:

Immediate 100% deductibility of health insurance premiums for the self-employed, sooner than under current law.

Repealing excise taxes on producers and marketers of distilled spirits, wine, and beer.

Raising the business-meal deduction from 50% to 80%.

Increasing the amount of business equipment eligible for a tax write-off from $19,000 to $35,000.

Restoring a law allowing a business seller to pay taxes in installments rather than requiring a lump sum.

Extending through 2004 the Work Opportunity Tax Credit, given to employers who hire certain disadvantaged workers.

Updating exemptions for computer professionals.

Changing employer rules for workers who receive tips.

Equalizing rules for salespeople.

Changing the way overtime is calculated when hourly workers get bonuses or performance incentives.

NOT "ECSTATIC." Small-business lobbyists had a mixed response to the compromise talks. "The typical small business would think this would be something they could live with and wouldn't be ecstatic about it, but also wouldn't think this is the most terrible thing ever," says Todd McCracken, president of the National Small Business United. "I think their typical response would be, 'Well, we got something, and we lost something.'" McCracken's group has argued in the past that a minimum-wage hike forces business owners to increase the pay of wage earners higher up the scale.

The National Federation of Independent Business vowed to continue to fight the minimum-wage increase, arguing it would kill small businesses' ability to create new jobs.

Either way, it's worth getting a calculator and checking the math. The minimum wage now stands at $5.15 per hour. That comes to $10,712 a year for a 40-hour workweek. One dollar an hour will push those workers to $12,792 before taxes -- $1,358 less than the official poverty-level income for a family of three.