Key Senators Float Corporate Tax to Enable Minimum-Wage Hike
(Bloomberg) -- Two Senate committee chiefs are looking at ways to raise taxes on companies paying workers less than $15 an hour, as part of a new strategy to include President Joe Biden’s push to boost the minimum wage to that level in his Covid-19 aid bill.
Senate Budget Committee Chairman Bernie Sanders and Senate Finance Committee Chair Ron Wyden said Thursday evening they were considering the strategy after prospects for making a wage increase part of the relief package were dealt a severe blow.
Earlier Thursday, the Senate parliamentarian ruled that Democrats’ minimum-wage proposal fell afoul of rules for the legislative process that congressional leaders are using for Biden’s $1.9 trillion aid bill. Requirements dictate that measures be primarily fiscal in nature; taxes are a component of fiscal policy.
“In the coming days, I will be working with my colleagues in the Senate to move forward with an amendment to take tax deductions away from large, profitable corporations that don’t pay workers at least $15 an hour and to provide small businesses with the incentives they need to raise wages,” Sanders said in a statement.
Sanders, a Vermont independent, added that his “amendment must be included in this reconciliation bill,” referring to the Covid-19 spending package.
Wyden, an Oregon Democrat, said in a statement that he is considering a “tax penalty for mega-corporations that refuse to pay a living wage.”
The White House did not immediately respond to a request to comment on the ideas. Press Secretary Jen Psaki said in a statement that Biden “respects the parliamentarian’s decision and the Senate’s process. He will work with leaders in Congress to determine the best path forward because no one in this country should work full time and live in poverty.”
White House economic adviser Brian Deese said Friday morning 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.
Thursday night’s developments -- on the eve of the House’s expected passage of the aid bill -- throw an air of uncertainty around the economic rescue package. Congressional leaders are planning to pass it by March 14, when enhanced unemployment benefits under a December aid bill expire.
Besides the wage increase, the bill includes $1,400 stimulus checks, an extension of the enhanced jobless benefits and funding for the vaccine rollout, along with money for state and local governments.
Democrats have less than three weeks to draft the changes, convince all 50 senators who caucus with the party to support the tax increases -- and the specifics of the minimum-wage hike.
The idea came after Senate Parliamentarian Elizabeth MacDonough found that the proposed phased-in hike to a $15 an hour minimum wage didn’t comport with the rules for the budget reconciliation process. That process allows bypassing the usual 60-vote threshold in the Senate.
Targeting only large, profitable companies could help assuage concerns from some moderate Democrats who are hesitant to support large-scale tax increases. The tax-hike play is likely to qualify under the reconciliation rules, which require all elements of the bill have a direct fiscal impact.
Still, Democrats don’t universally support a $15 an hour wage requirement. Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona said they wouldn’t vote for a bill with the provision as written included.
That could mean negotiations as Wyden and Sanders develop a workaround strategy to compel companies to increase employee pay.
The push is also likely to prompt criticism from Republicans and backlash from restaurants and retailers that oppose a $15 an hour wage requirement -- arguing that it will force businesses to close.
The International Franchise Association “supports a conversation around the minimum wage, but the only thing worse than doubling the labor costs of small businesses is disguising it through a backdoor tax increase in the middle of a pandemic while they are still struggling to recover from the worst economic downturn in nearly a century,” Matt Haller, a spokesman for the group, said in a statement.
Caroline Harris, vice president of tax policy at the U.S. Chamber of Commerce, said “the last thing you want to do is raise taxes in the middle of an economic crisis.”
“Tax hikes are simply not part of the recipe for economic recovery,” Harris said in an emailed statement.
Democrats had largely avoided major tax increases in the $1.9 trillion stimulus package, saying they would consider increases on corporations and the wealthy once the economy had recovered from the pandemic. Treasury Secretary Janet Yellen said on Monday the administration is considering corporate tax hikes to help fund an infrastructure bill that could move later this year. She also signaled openness to a higher capital gains levy.
After the House votes on its version of the stimulus bill, with the $15 minimum wage mandate included, the bill will then go to the Senate, where it can be amended.
©2021 Bloomberg L.P.