An increase in the federal minimum wage was attached to the fiscal 2007 war supplemental funding bill struck down by the President’s veto pen this week.  For months, passage of an increase in the minimum wage was held hostage over the size of an accompanying set of business-related tax breaks.  The House initially passed a clean bill with no tax breaks.  Then the Senate added $8.3 billion in business-related tax breaks to its bill.  The House responded by including a much smaller $1.3 billion package of breaks.  When negotiations stalled, both the House and Senate added their minimum wage increase and tax packages to the supplemental spending bill.
As a conference committee worked to come to agreement on the $124 billion FY ’07 supplemental spending request to fund the wars in Iraq and Afghanistan, negotiators also reached a deal on the $4.8 billion package of business tax breaks attached to the minimum wage.  The tax breaks ostensibly help small businesses said to be most affected by an increase in the minimum wage.  However, more than half, or almost $2.6 billion, will pay for a three and one-half year extension of the Work Opportunity Tax Credit used to encourage companies to higher low-wage workers, which is most often claimed by larger companies.

The supplemental spending bill was vetoed in large part because the President strongly objected to its call for date-certain withdrawal of troops from Iraq.  The Administration also objected to the fact that the $124 billion exceeded its original request by $21 billion.  The additional money was directed toward VA and Defense healthcare, homeland security, Katrina recovery, disaster farm aid, pandemic flu preparedness, the Low Income Home Energy Assistance Program, and funds to address the 2007 shortfall in the State Children’s Health Insurance Program.  With a vote of 222-203, the House failed to garner the two-thirds majority needed to override the President’s veto. 

The House and Senate will now go back to the drawing board to negotiate another supplemental spending bill. All agree that within the next weeks a bill will be enacted, as neither Congress nor the Administration wants to be held responsible for not supporting the troops on the ground.  It is not clear whether all of the non-military spending will be included in the next bill.  In the meantime, even though negotiators have finally agreed on the minimum wage/tax break package, low-wage workers still wait for an increase in their pay.

Subscribe: