Minimum wage bill stalls

By Sean Aqui | Related entries in Economy, General Politics, Legislation, Money, News

The minimum wage bill saw a lot of action in the Senate but few actual results.

As promised, Harry Reid let the Republicans propose a line-item veto amendment on the bill. That was rejected 49-48, but could come back up again because that vote was far less than the 60 needed to invoke cloture and cut off debate.

However, the immediate debate moved on to other grounds, namely Republican insistence that the wage increase be paired with tax breaks for small businesses to help cushion the blow. Senate Democrats are amenable, but the House could force the issue on two fronts: the House bill doesn’t contain tax breaks, and it’s the House’s prerogative to propose tax measures.

The lack of tax breaks led Senate Republicans to block the wage bill, so it’s currently at an impasse.

I would have liked to see the line-item veto pass, but it had its chance and is done. If there’s a reasonable opportunity to revive it, fine, but it should not be used to hold up the wage bill.

Overall, the House should compromise in this case. The proposed tax breaks are reasonable: extending a tax credit for employers that hire low-income workers, and a simplified expense deduction for small businesses. Further, as required by the new pay-as-you-go rules, the $8.3 billion cost will be offset by a cap on tax-deferred executive pay and the elimination of an array of tax shelters. That provision alone is worth the price of admission, as such tax-deferred paydays are at the root of many a tax-avoidance scheme. House Democrats would be foolish to let a fit of pique get in the way of such progress.

Negotiations continue, and the Senate will take another crack at it soon. Let’s hope reason prevails.


This entry was posted on Wednesday, January 24th, 2007 and is filed under Economy, General Politics, Legislation, Money, News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

11 Responses to “Minimum wage bill stalls”

  1. SD Law Student Says:

    The line-item veto is a bad idea. It undermines congress in favor of a stronger executive branch.

  2. Sean Aqui Says:

    It’s a tool, and a limited tool at that. The power is limited to spending items, Congress can override the veto with a simple majority, and the president is constrained by politics from getting too cute with it. If he cut Democratic pork but kept Republican pork, for example, the Democrats would simply stop playing and throw sand in the gears of Congress.

    It’s a valuable, if minor, tool for separating out questionable spending for a separate vote, instead of attaching it to must-pass legislation.

  3. DosPeros Says:

    I’ve set up several “Rabbi” trust for clients which are used to defer compensation and ulimately to pay a lower tax rate on said income. They are great tools, not only for tax avoidance (which should be encouraged), but also, in a larger sence in my opinion, for estate planning.

    The unintended consequenses of your class warfare Sean is: Actually bolstering the appeal of stock options and other means of compensation (bonuses, exc.)

    But…thanks for the business — the more you try to screw the successful, the more they pay people like me to figure out how to unscrew them. Keep it coming — some day you’ll win and then no one will have to go to work. Yippy.

  4. Sean Aqui Says:

    Estate planning is great, as is retirement planning. And there is a place for tax-deferred savings plans, such as 529s and 401(k)s and Roths. But many corporate deferred-compensation schemes go way beyond that.

    I’m not sure why it is “screwing” people to suggest that as a general rule, income should be taxed when it is earned, and exceptions should be narrow and few. Stock options and bonuses? Fine with me. As long as they’re properly accounted for and taxed.

  5. sleipner Says:

    Huh…so Dos, what you want is that no one pays any tax whatsoever (or at least the rich), and we end up with no government, no police, no firefighters, no schools, no water, power, or sewage services, no road maintenance, etc. All of those things cost money, and lots of it. Sure, some could probably be handled more efficiently, but wouldn’t it make sense to try to make that happen, rather than just strangling them by taking away the resources they need to exist?

    Incidentally, who you’re really screwing is the 80% of Americans not in the tax brackets you help cheat out of paying their fair share for our society.

  6. DosPeros Says:

    “Screwing” is probably the wrong word — “stealing” is a far more appropriate term in terms of income tax in my opinion.

    Stock options and bonuses? Fine with me. As long as they’re properly accounted for and taxed.

    Really. That is fascinating. I personally don’t really like stock options as a means of compensation because of the executive’s ability to manipulate the price of that stock (perfectly legally) seems a natural conflict of interest, at odds with sound long-term business practices. He goes to work each day hedging his bet. The same with bonuses. Why do you insist on puttig Profit above People, Sean?

    The fundamentals of federal income tax requires 1) the recognition and 2) the realization of the income. It is not based on “when it is earned”. Why not? I work hard (“earn”) for income that I will not see for years — should I be taxed on that future income now or when I see the money… I know, Sleipner…both.

  7. SaneInSf Says:

    Minimum wage is not a very good tool. All it does really is to boost the income of teenage workers (a lot of whom are from well-off families). It does not materially help the working poor.

    Want to help them? Earned Income Tax credit. It doesn’t penalize employers and it encourages people to look for work to get this credit. And far less complicated than modifying the already bastardized complex tax code AGAIN for small businesses.

  8. Jimmy the Dhimmi Says:

    Less than 2.5% of hourly-paid workers (about 1.5% of all workers) recieve minimum wage.

    Of those people, about 60% are teenagers or young adults (under the age 0f 25) with no dependents, who are likely students or in transition.

    Minimum wage workers have dropped signigicantly as a percentage of the population over the past five years, and that trend is likely to continue considering that the country is hovering around max employment right now.

    To me, this is really not such a big issue, so if the Dems want to raise it, fine; there won’t be much of an impact overall, at all. They should give their opponents something in return, though. If this is the major economic issue that concerns the democratic party, then they are truly inept.

  9. Sean Aqui Says:

    I personally don’t really like stock options as a means of compensation because of the executive’s ability to manipulate the price of that stock (perfectly legally) seems a natural conflict of interest, at odds with sound long-term business practices. He goes to work each day hedging his bet. The same with bonuses.

    There are all sorts of conflicts of interest with CEOs. Heck, even straight salary can cause problems if the CEO thinks he needs to put short-term gains ahead of long-term gains in order to keep receiving it.

    The obscene thing about executive compensation is not that it comes in various forms (salary, bonus, options, long-term compensation, perks, health bennies, pension bennies, etc. etc.). It’s that far too often each of those categories pays enough to qualify as their entire compensation. Small salary, compensated for by big bonuses and options if real targets are met? Fine. Big salary but limited options? Fine. Moderate salary and bonus, but hefty long-term compensation to encourage long-term thinking? Fine.

    Giant salary, huge bonus for hitting easy-to-reach targets, gigantic unexpensed option grants at ridiculously low strike prices, long-term compensation that pays out handsomely even if performance is mediocre, huge severance package? Problem. All of it set by the CEO’s buddies? Root of the problem.

    Still, that’s basically a problem for shareholders, not the government. But the government doesn’t need to encourage shenanigans by allowing much of that money to be socked away tax free for years.

    The fundamentals of federal income tax requires 1) the recognition and 2) the realization of the income. It is not based on “when it is earned�. Why not? I work hard (�earn�) for income that I will not see for years � should I be taxed on that future income now or when I see the money…

    That rather distorts the meaning of “when it is earned.” When the money flows to you, you should be taxed on it. Not before. Not after, except in narrow circumstances such as 401(k)s and the like.

  10. DosPeros Says:

    It’s that far too often each of those categories pays enough to qualify as their entire compensation.

    Well, that’s very honest of you Sean. Must our tax system always remain income punitive (i.e. “progressive”)? Deferred income allows a way around that punishment in the same way that a flat tax would.

  11. Sean Aqui Says:

    I was making a personal moral point, not a tax one.

    As far as taxation, I think a mildly progressive tax system is both practical and moral — more so, in both cases, than a flat tax. It simply makes sense to tax everyone’s second $100,000 more heavily (NOT punitively, but a somewhat higher marginal rate) than their first. And their third $100,000 more heavily than that (these are not meant to reflect actual tax brackets….)

    Why? Morally, because if you’re going to tax, it’s better to reduce the ability to buy a second car than a first. Practically, because that’s where the money is.

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