The Senate Finance Committee has approved a package of tax breaks for small businesses, legislation aimed at addressing one hurdle in the way of Congress passing an increase to the federal minimum wage.
The package includes $8 billion in tax incentives designed to help small businesses if Congress raises the minimum wage. The legislation, for example, would extend for five years the Work Opportunity Tax Credit, which is available to employers that hire workers who have experienced barriers to entering the workforce.
The Senate is set to consider legislation that would raise the federal minimum wage from $5.15 per hour to $7.25 per hour over a period of 26 months.
President Bush has said that he would support raising the minimum wage if Congress also approves tax and regulatory breaks for small businesses.
Last week, the U.S. House of Representatives approved the minimum wage legislation that is now before the Senate. However, the legislation contained no tax breaks for small businesses. Without the tax breaks, the legislation faced tougher hurdles in the Senate, where Republicans could use the power of the filibuster.
Business groups oppose an increase to the minimum wage, arguing that it would be especially burdensome on small businesses and would hurt the economy.
The federal minimum wage has been $5.15 per hour since 1997. Twenty-nine states have approved minimum wages above $5.15 an hour, including ten that have tied future increases to inflation. Any action on the federal level would affect a number of those 29 states because many of the state minimum wages would fall somewhere in between the first and third steps of the House-approved proposal. In the case of conflicting minimum wage levels, the federal or state law that is more generous to employees takes precedence.