Senate Votes to Raise Minimum Wage

On February 1, the Senate voted 94-3 to increase the federal minimum wage from $5.15 to $7.25. The House had passed a similar bill in early January.

Once the two reconcile the bills, the minimum wage will be increased for the first time since 1997.

the $2.10-an-hour increase would happen in three stages
  1. to $5.85 per hour 60 days after being signed into law
  2. would then rise to $6.55 per hour one year later
  3. to $7.25 after two years

about $4,000 per year extra to a minimum-wage employee working full time

237,000 workers (16 percent of the workforce) would be affected

centerpiece of the Democratic party’s 100-hour domestic legislative agenda

The House had passed a bill that dealt solely with the minimum wage, while the US Senators tacked on several business-related provisions.

  • Five-year extension of a tax credit for businesses that hire poor people, high-risk youths and veterans on government assistance
  • Extension till 2010 of the ability of small businesses to deduct up to $112,000 in capital costs
  • Extension to March 31, 2008, of tax breaks to shorten depreciation periods for restaurant and retail properties
  • Increase in the threshold for businesses eligible to use cash method of accounting from average gross receipts of $5 million to $10 million
  • Protection against the IRS of businesses that use professional employer organizations for payroll and other human resources functions
  • Elimination of tax deductions for punitive damages, fines and penalties.
  • Limit on allowable tax-deferred income at $1 million, or at 100 percent of the average annual salary over a five-year period.
  • Loopholes would be closed for tax avoidance schemes by companies that set up foreign tax shelters.
  • Companies caught hiring illegal immigrants would be prohibited from getting federal contracts for up to 10 years.