White House Is Hesitant on Proposed Tax Penalty: Stimulus Update

(Bloomberg) -- The White House has declined to take a position on new proposals to impose a penalty on big U.S. companies as a way to push through a minimum-wage increase. The initiative put forward by two Senate committee chairs threatens to complicate passage of President Joe Biden’s $1.9 trillion pandemic-relief bill.

Senate Majority Leader Chuck Schumer is weighing adding a provision to the relief bill that would put a penalty tax on big companies that don’t pay workers at least $15 an hour, a Democratic aide said on condition of anonymity.

Proposals emerged after a ruling by the Senate parliamentarian that Democrats’ minimum-wage proposal, as previously drafted, fell afoul of rules for the legislative process congressional leaders are using for the bill. Requirements dictate measures be primarily fiscal in nature.

The House is scheduled to take up the stimulus bill on the floor of the chamber Friday -- including a phased-in minimum wage increase to $15 an hour -- with passage expected late in the evening or potentially Saturday.

Action then shifts to the Senate, where changes to the legislation are certain, given the minimum-wage debate and a separate requirement to trim some spending after the Congressional Budget Office said the House legislation costs more than the limit set by the House and Senate earlier this month.

White House Not Ready to Embrace Proposed Tax Penalty (2 p.m.)

White House Press Secretary Jen Psaki said Friday that the administration didn’t yet have a position on proposals from two Senate committee chairs to impose a tax penalty on big companies as a means of enacting a minimum-wage hike.

Senate Budget Committee Chair Bernie Sanders and Finance Committee Chair Ron Wyden issued separate initiatives late Thursday and early Friday (see items below for more.)

“We have not yet even reviewed, as of the time we took off, their proposal,” Psaki told reporters en route with Biden to Texas midday Friday. “We are committed to finding the best path forward to increase the minimum wage, and that will require a number of conversations with leaders in Congress and members who are committed to this issue moving forward.” -- Nancy Cook and Jordan Fabian

Schumer Weighs Adding Tax on Big Companies to Enable Wage Hike (10:49 a.m.)

Senate Majority Leader Chuck Schumer is weighing adding a penalty tax on big companies in order to smooth the way for including a minimum-wage hike in the $1.9 trillion Covid-19 relief plan now before Congress.

Schumer is looking at adding a provision that would penalize large corporations that don’t pay workers at least $15 an hour, according to a Democratic aide who spoke on condition of anonymity.

Democrats have sought to include a phased-in increase in the federal minimum wage from $7.25 to $15 an hour in the pandemic-assistance legislation. -- Erik Wasson

Senate Finance Chair Floats 5% Tax on Big Firms’ Payroll Costs (10:11 a.m.)

Senate Finance Committee Chair Ron Wyden on Friday proposed a tax on big companies’ payroll costs that would start at 5% as punishment if any of their workers “earn less than a certain amount.”

Wyden, along with Senate Budget Committee Chair Bernie Sanders, both floated corporate-tax measures to be attached to the Covid-19 relief bill as a means of reviving the minimum-wage hike Democrats want to include in the bill. That’s after the Senate parliamentarian, Elizabeth MacDonough, ruled Thursday that the wage increase as proposed didn’t qualify for the fast-track legislative procedure Democrats are using for the aid bill.

“While conversations are continuing, I believe this ‘plan B’ provides us a path to move forward and get this done through the reconciliation process,” Wyden said of his tax-hike idea.

The 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.

Business groups including the Chamber of Commerce and International Franchise Association criticized moves to boost taxes as part of the aid bill. -- Erik Wasson

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