U.S. Senate Votes to Increase Minimum Wage

On February 1, 2007, the U.S. Senate voted overwhelmingly (94-3) to raise the minimum wage to $7.25 an hour over two years, but packaged the increase with small business tax cuts, limits on corporate pay and a ban on awarding federal contracts to companies that hire illegal immigrants.

The legislation would raise the minimum wage in three steps: to $5.85 an hour upon taking effect 60 days after the president signs it into law; to $6.55 an hour a year later; and to $7.25 an hour a year after that.

Besides increasing the minimum wage, the bill would extend for five years a tax credit for businesses that hire the disadvantaged and provide expensing and depreciation advantages to small firms. The tax breaks would be paid for by closing loopholes on offshore tax shelters, capping deferred compensation payments to corporate executives and removing the deductibility of punitive damage payments and fines. Senators also adopted an amendment that would bar companies that hire illegal immigrants from obtaining federal contracts.

The bill must now be reconciled with the U.S. House version passed on January 10, 2007 that contained no tax provisions. House Democrats have insisted on a minimum wage bill with no strings attached, but President Bush has encouraged House Democrats to accept the Senate version of the bill.

N. DeWayne Pope, DeWayne Pope LLC