Senate Rejects Minimum Wage Hike

A Republican election year effort to fuse a cut in inheritance taxes on multimillion-dollar estates to an increase in the minimum wage was rejected by the Senate late Thursday.

Republicans needed 60 votes to cut off debate and advance the bill - officially entitled the "Family Prosperity Act" - which links a $2.10 increase in the $5.15 federal minimum wage over three years to reductions on estate taxes next decade. The legislation, which was approved by the House last Saturday, got a 56-42 vote in the Senate: four votes short of succeess.

The vote would have been 57-41, but Senate Majority Leader Bill Frist switched his vote in a maneuver which preserves his right to debate the bill again this fall. The Tennessee Republican urged senators who voted against it to "rethink long and hard" before lawmakers reconvene in September.

The federal minimum wage of $5.15 an hour hasn't been raised since 1997.

In addition to a cut in the estate tax, the measure also contained one other poison pill element that was distasteful to advocates of a minimum wage hike: a provision that, in seven states, would have cut into the earnings of employees who earn tips.

Sen. Maria Cantwell, a Democrat from Washington state, said that would have meant a $5 an hour pay cut for waiters, waitresses and other tip earners in Washington state. She voted "no," as did her fellow Democrat from Washington, Sen. Patty Murray.

"This is a cynical ploy on the part of the Republican leadership in an election year," said Cantwell.

Texas Republican Sen. Kay Bailey Hutchison also decried the politics in the issue - although from an opposite point of view.

"It is an excuse to make it a do-nothing Congress," Hutchison told the New York Times. "We are turning our back on the middle-class and poor people in this country who depend on the minimum wage and death-tax relief."

For Republicans, approval of the legislation could have neutralized a Democratic campaign issue while also advancing an estate tax cut, a priority that may have an uncertain future if the GOP loses seats in Congress in November's election.

The GOP strategy put Democrats in an uncomfortable position. Either they could vote against the bill — thus rejecting a minimum wage increase — or they could vote for it, thus agreeing to cut taxes on multimillion-dollar estates. Most rejected the bill, blocking a GOP victory months before the election.

Four Democrats joined Republicans and voted for the bill: Sens. Robert Byrd of West Virginia, Ben Nelson of Nebraska, Bill Nelson of Florida and Blanche Lincoln of Arkansas. Two Republicans voted against the bill: Sens. Lincoln Chafee of Rhode Island and George Voinovich of Ohio.

Senate Majority Leader Bill Frist, R-Tenn., has tried repeatedly this year to repeal or reduce the estate tax, derided as the "death tax" by its opponents.

"This death tax punishes everyday Americans by forcing them to give up their business, to give up their farms," he said.

An earlier bid to move an estate tax bill to debate fell three votes short of succeeding. Frist and House Republican leaders had hoped adding the minimum wage, along with a package of popular tax cuts, could carry it to passage.

Among other things, the bill resurrects deductions that expired last year for state sales taxes, tuition and teachers' classroom supply purchases, along with a business research and development credit.

The bill had extra items to entice Democrats who were uneasy about voting for the estate tax reductions. The add-ons included a cut in timber capital gains taxes, rural development incentives and a program cleaning up abandoned coal mines.

Democrats criticized the GOP for only agreeing to increase the minimum wage to $7.25 over three years by attaching it to an estate tax cut, and they said voters will understand the Democratic opposition, even though it means rejecting a higher minimum wage.

"The American people won't fall for it," said Senate Minority Leader Harry Reid, D-Nev.

Under President Bush's first tax cut, the estate tax shrinks through this decade and disappears in 2010. It reappears at older and higher rates in 2011.

The estate tax and minimum wage bill would, by 2015, increase the amount of an estate exempt from taxation to $5 million for an individual and $10 million for a couple. Estates worth up to $25 million would be taxed at capital gains rates, currently 15 percent and scheduled to increase to 20 percent. The top tax rate on larger estates would fall to 30 percent by 2015.

Also Thursday, the Senate approved and sent to the White House pension legislation that could give millions of Americans a better chance of getting the retirement benefits they've earned while sparing taxpayers from possibly paying for failed pension plans.

The legislation, passed 93-5, also provides new incentives for young workers to enroll in 401(k) plans, reflecting the trend away from traditional employer-based pensions.