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Home :  Federal Budget & Tax : 
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Friday, January 26, 2007

Senate Wends its Way on Wage Bill

The Senate has been making no concessions to the shortness of life in its deliberations on S. 2, the minimum wage bill.

A welter of far-flung amendments was debated and voted on this week, with most of them rejected in the end. One amendment related directly to the Baucus small business $8.3 billion tax amendment - Sen. Kyl's (R-AZ) effort to extend tax breaks for restaurants and retailers for a whole nine months - ended up a 50-42 loser. A few others have related to the wage increase itself, such as Sen. Jim DeMint's (R-SC) bid to increase every state minimum wage by $2.10 - which went down 18-76.

"One hundred seventy-nine amendments from the other side, zero from our side!" counted Ted Kennedy (D-MA).

The other main amendments losing on roll call votes were from:

  • Sen. John Ensign (R-NV) on health savings accounts (47-48)
  • Sen. Gordon Smith (R-OR) on extending education tax incentives (43-50)
  • Sen. Jim Bunning (R-KY) repealing the 1993 Social Security tax increase (42-51)

But aside from a no-brainer amendment by Sen. Jeff Sessions (R-AL), to bar companies from receiving government contracts if they are caught hiring illegal immigrants, none of these was adopted.

As the debate continued through the week, it was in noticeable contrast with the alacritous House action on minimum wage (noted here earlier) - showcasing how a bare majority in the Senate is barely a majority at all.

Yet there may be a method to their slowness. If the GOP is so eager to keep a no-confidence vote on President Bush's Iraq policy off the floor -- one which threatens to divide and deflate them -- as least they could sound like they care about the putative impact of the minimum wage hike on small business.

Reid finally moved to end debate on the Baucus tax cut amendment today, with votes on it likely next Tuesday and then on S. 2 itself later next week.



Posted by Dana Chasin, 07:06:48 PM



Thursday, January 18, 2007

Income Inequality Continues Apace

The latest EPI Snapshot presents yet more data points on the trend in rising inequality. Lawrence Marshall and Jared Bernstein describe two notable measures of inequality growth:

(1) The share of corporate income going to the owners of capital

The most recent data (third quarter of 2006) reveal that owners of capital received 23.0% of all corporate income, the highest share since 1966. That means that the compensation of employees was at the lowest share in over 25 years.

and (2) the share of capital income going to the top 1% of the income scale

[T]hose in the top 1% of the income scale received 59.4 % of all the capital income in 2004 (CBO's latest data), up from 49.1% in 2000, 39.1% in 1989 and just 37.8% in 1979. The increase in the concentration of capital income to the upper 1% grew as quickly over the four-year period from 2000 to 2004 as over the preceding 11 years (1989-2000).


Posted by Craig Jennings, 12:32:46 PM



Thursday, January 11, 2007

Baucus Nearing Completion on "Trifecta Lite"

Senator Max Baucus (D-MT) is putting the finishing touches on a minimum wage bill that also cuts taxes for small businesses. Even though the House overwhelmingly passed a clean minimum wage bill, Baucus says the $10 billion in proposed tax breaks are needed to offset the hardship a higher minimum wage might impose on small businesses

Yet the tax breaks may turn out to be a windfall for businesses that don't employ low-wage workers. Only one of the tax breaks is conditioned on employing very low wage workers, and none are calibrated to compensate for the marginal costs of higher wages, assuming they aren't passed on to consumers. In testimony to Congress yesterday, Jared Bernstein of the Economic Policy Institute makes these points generally.

Since many businesses with low-wage workers are already paying wages above $7.25 (or will be by 2009), or are in states with higher minimum wages, it will be very difficult to target any offsets to firms actually facing higher labor costs due to the proposed increase.

Even if Congress could target the cuts, it is not clear what costs these tax cuts are supposed to offset. Since employment effects are negligible at best, these cuts will not lead businesses to retain workers they would have otherwise laid off. This, along with the targeting challenge, raises the possibility that the cuts could end up being a windfall for businesses that have already received billions in tax cuts.

So essentially, tax breaks and the the minimum wage increase have almost nothing to do with each other.

Sen. Baucus is taking a page from a familiar playbook here. Recall that Congressional Republicans tried to tie a minimum wage bill to unrelated tax breaks back in the infamous "trifecta" bill. The new sweeteners aren't in the same league as trifecta, which would have cost nearly $750 billion, but Sen. Baucus is playing the same cynical game of legislative horse-trading.

Call the Senate bill trifecta "lite." Minimum wage workers, denied a raise for the last 10 years, deserve better than this.



Posted by Matt Lewis, 11:45:34 AM



Wednesday, January 10, 2007

House Passes Long-Overdue Minimum Wage Raise

Alright!

By a wide margin (312 to 116), the House just passed a raise in the minimum wage. No Democrats voted against it, and 82 Republicans voted for it, even though it had no other "sweetening" provisions, such as tax breaks for businesses.

The ball is now in the Senate's court.



Posted by Matt Lewis, 05:38:35 PM



Sen. Baucus Taken to Task in Washington Post

Steven Pearlstein, the business columnists for the Washington Post, has a blistering expose on Sen. Finance Committee Chairman Max Baucus (D-MT) in today's paper. Pearlstein wonders how (or perhaps why?) Sen. Baucus was able to work his way to the top of the Democrats' list to lead the Finance Committee when many if not all of his views on committee business are essentially contrary to the Democratic Party platform. A few excerpts:

But while Baucus is surely entitled to his opinions, and entitled to do what is necessary to assure his own political survival, he is not entitled to be chairman of the Senate Finance Committee, which handles such key Democratic issues as health care, trade and tax policy. That position ought to be reserved for a statesman with enough political confidence and backbone that he isn't constantly sacrificing the interests of his party and his country to the narrow interests of his subsidy-addicted constituents.

You'd think Baucus would have learned his lesson in 2001, when he won the enmity of Democrats everywhere by striking the deal that led to passage of the Bush tax cuts, including the phase-out of the estate tax. Apparently not. For on the very day the new Democratic House is set to push through a long-overdue minimum-wage increase, over in the Senate, Baucus has called a hearing on how to offset the "economic hardship" caused by the higher minimum wage with yet another round of business tax breaks.

[...]

Real Democrats know that raising the minimum wage is the right thing to do -- economically, politically, morally. The question is why they have chosen a Senate Finance chairman who can't articulate that position without equivocation or apology even before the first vote is cast.

That's pretty hard hitting stuff, and Pearlstein makes a convincing argument in the full article. It's definitely worth a read.



Posted by Adam Hughes, 04:07:58 PM



Monday, January 08, 2007

Stating The Obvious

Today, the NYT reminds us that the tax cuts of 2001 and 2003 disproportionately benefited the wealthy over the middle class, the super wealthy over the wealthy, and the wealthy-beyond-your-imagination over the super wealthy.

Tax cuts were much deeper, and affected far more money, for families in the highest income categories. Households in the top 1 percent of earnings, which had an average income of $1.25 million, saw their effective individual tax rates drop to 19.6 percent in 2004 from 24.2 percent in 2000. The rate cut was twice as deep as for middle-income families, and it translated to an average tax cut of almost $58,000.

That means that wealthier people didn't just get more of a tax break because they pay more in taxes. Their rates were cut more than everyone else's.

Which reminds me, why are taxes on the rich still so low?

Why are taxes on the rich still so low when only the rich have seen their wages and salaries grow in this recovery? When the rich have been getting richer, the middle class has been getting nowhere, and the poor have been getting poorer? When workers are more productive, but don't earn more?

Why are taxes on the rich still so low when we're fighting a war where the few are paying the price for the many? When the President is thinking about expanding that war and asking for another $100 billion to fund it?

Why are taxes on the rich still so low when, in the long run, it doesn't really increase economic growth?

Why are taxes on the rich still so low when Congress and the President say we don't have enough revenue for things like Medicaid, Head Start, and student loans?

Why are taxes on the rich still so low when we keep running high deficits? When we'll face even larger deficits when the baby boomers retire?

And so on...



Posted by Matt Lewis, 03:04:24 PM




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