April 2007

Legislative compromise | Capitol Hill

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Legislative compromise

by Craig S. Brightup
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As we go to press, it is possible the U.S. House of Representatives and Senate will have reconciled differences between their respective tax proposals that include increases in the federal minimum wage, and the Fair Minimum Wage Act of 2007, HR 2, could be on its way to the president's desk. But the manner in which the minimum wage hike was turned into a tax bill provides an instructive pattern for NRCA members that could be repeated during the 110th Congress.

During the first 100 legislative hours of the 110th Congress, Speaker of the House Nancy Pelosi (D-Calif.) pledged "to pass key measures affecting the everyday lives of all Americans." A major component of this agenda was raising the minimum wage, and on Jan. 10, the House passed HR 2 to raise the minimum wage from $5.15 to $7.25 per hour during a two-year period. The House passed the measure as a stand-alone bill with no benefits for small businesses, and Pelosi and her allies demanded the Senate also pass HR 2 with no amendments attached.

But the Senate, with 51 Democrats and 49 Republicans, cannot pass legislation strictly along party lines because 60 votes are needed to invoke cloture and end unlimited debate. Republicans have the votes to prevent cloture and insisted HR 2 be paired with tax breaks aimed at helping small businesses. This led the Senate to craft a tax package that could obtain enough votes and be added to HR 2.

On Feb. 1, the Senate passed HR 2 by a vote of 94-3, agreeing to include an $8.3 billion package of tax incentives. The bill would extend the Work Opportunity Tax Credit for five years for employers who hire from eight categories of workers listed by the U.S. Department of Labor; raise to $10 million the gross receipts threshold for businesses to qualify to use the cash method of accounting; extend through 2010 the Section 179 expensing provision that allows small businesses to deduct as much as $112,000 annually from income in new capital investments; broaden the pool of companies that can organize as Subchapter S corporations; and extend shorter tax depreciation schedules for restaurant and leasehold improvements to a wider audience...

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Work Opportunity Tax Credit

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