Democrats Scramble to Add Wage Hike Without Slowing Stimulus
(Bloomberg) -- Democrats are racing to salvage a key progressive agenda item -- higher wages for low-paid workers -- but they are running out of time to attach it to their $1.9 trillion stimulus bill and pass the legislation by a March 14 deadline.
Senate Majority Leader Chuck Schumer is considering whether to add a provision that would penalize large corporations that don’t pay workers at least a $15 hourly wage, said a senior Democratic aide. That’s the level President Joe Biden proposed to phase in as part of his Covid-19 relief program.
The prospect of adding a tax measure presents a major complication. Democrats would need to finish writing the new language, vet it, and unite all 50 senators in their caucus behind it.
While the House is expected to pass its version of Biden’s stimulus late Friday, the real action is in the Senate, after the parliamentarian ruled that raising the $7.25 minimum wage, as written in the existing legislation, did not qualify for budget rules bypassing a Republican filibuster.
Measures in the reconciliation bill must be primarily fiscal in nature, and Elizabeth MacDonough ruled that the Democrats’ measure only had an incidental fiscal effect.
Senate Finance Chairman Ron Wyden outlined the idea of a penalty tax on big companies Friday morning. While taxes are inherently part of fiscal policy, the move -- if framed as a penalty -- might not necessarily qualify under reconciliation rules, congressional experts said.
Wyden’s so-called Plan B proposal hits big companies with a “penalty” on their total payroll that starts at 5% and increases over time if any workers earn less than an amount that Wyden didn’t specify in his statement Friday. There would also be “safeguards to prevent companies from trying to outsource labor to avoid paying living wages.”
Wyden didn’t specify the size of companies affected. He said he would provide a benefit to “the smallest of small businesses,” with an income-tax credit equal to 25% of wages, up to $10,000 a year per employer, to those that pay their workers higher wages.
Senate Budget Chairman Bernie Sanders on Thursday night floated his own proposal. He said large corporations should lose their tax breaks if they don’t pay a $15 an hour wage, and smaller companies should get incentives to pay higher wages.
A Republican, Josh Hawley of Missouri proposed a similar concept Friday. He proposed requiring companies with revenues of $1 billion or more to pay their workers at least $15 an hour. The plan would require that minimum wage to be indexed to a gauge of median wages after 2025.
Some senior Democrats stopped short of endorsing the idea of a tax penalty as part of the pandemic-aid legislation when asked about it on Friday.
House Ways and Means Committee Chair Richard Neal said, “I don’t know what is going to happen in the Senate so I hesitate to comment.” He also emphasized the importance of meeting the deadline for the aid bill of March 14 -- when enhanced unemployment benefits approved in December expire.
“Time is ticking, and we have to do everything in our power to keep unemployment benefits from lapsing and delivering the other urgent relief in this package,” said Neal, whose committee has jurisdiction over taxes, in an email.
Adding a tax increase could give Republicans a new way to attack the bill politically. “It is the wrong time to be destroying the economy and higher taxes have been proven to ship more jobs overseas,” Representative Steve Scalise of Louisiana, the second-ranking House Republican, said
Asked about the Sanders proposal, House Financial Services Committee Chair Maxine Waters said, “I don’t know about that. I do know that a transaction tax has been talked about in financial services. So I would certainly entertain looking at something like that.”
The White House hasn’t specificed whether it backs the corporate-tax penalty idea. Top Biden economic adviser Brian Deese said Friday on MSNBC that the administration will “talk this morning and in coming days” with congressional leaders to “figure out the best way” to proceed with a minimum-wage hike while at the same time making progress on the aid bill.
Apart from the corporate tax-penalty element, there remains opposition among two moderate Senate Democrats -- Joe Manchin and Kyrsten Sinema -- to the $15 minimum-wage proposal as written in the House bill.
Manchin has proposed an $11 minimum wage in two years, followed by inflationary increases. Sinema has said she doesn’t favor adding the minimum wage to the Covid-19 relief bill.
A group of Republicans, meanwhile, has proposed a $10 minimum wage in five years tied to mandatory electronic verification by employers of their employees’ immigration status.
Sanders has expressed skepticism about whether 60 votes can be found in the Senate for a stand-alone minimum-wage hike, however. Progressives have insisted that the measure be included in the aid bill.
Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, said that he wasn’t confident that a tax penalty to enforce a wage hike would qualify under the reconciliation rules.
“There has to be real effect on the budget. And for real effects on the budget, somebody actually has to pay the tax. So if this tax is so punitive that nobody actually pays it, then it might not count,” he said.
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