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Friday, August 4, 2006 - Page updated at 08:05 AM

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Minimum-wage boost defeated

WASHINGTON — A Republican election-year effort to combine a cut in inheritance taxes on multimillion-dollar estates with the first minimum-wage increase in nearly a decade was rejected by the Senate late Thursday.

Republicans needed 60 votes to advance their bill, which links a $2.10 increase in the $5.15 federal minimum wage over three years to reductions an estate taxes next decade. But the measure fell four votes short, 56-42.

Prodded by moderate Republicans eager to undercut criticism by Democrats that GOP economic programs overwhelmingly favor the rich, the House approved the package last week, including a three-year phased-in boost in the federal minimum wage to $7.25 from the current $5.15. It would have been the first increase in the minimum wage in nine years.

The GOP strategy put Democrats in an uncomfortable position. Either they could vote against the bill, thus rejecting a minimum-wage increase — or they could vote for it, thus agreeing to cut taxes on multimillion-dollar estates.

Both of Washington state's senators, Democrats Patty Murray and Maria Cantwell, voted against the measure. "This is a cynical ploy on the part of the Republican leadership in an election year," Cantwell said in a statement.

Democrats said voters would understand their opposition.

"The American people won't fall for it," said Senate Minority Leader Harry Reid, D-Nev.

Senate Majority Leader Bill Frist, R-Tenn., had tried repeatedly this year to repeal or reduce the estate tax, derided as the "death tax" by its foes.

"This death tax punishes everyday Americans by forcing them to give up their business, to give up their farms," he said.

An earlier bid to move a standalone estate-tax bill to debate fell three votes short. Frist and House Republican leaders had hoped that adding the minimum-wage increase, along with a package of popular tax cuts, could carry it to passage.

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Among other things, the bill would have resurrected deductions that expired last year for state sales taxes, tuition and teachers' classroom-supply purchases, along with a business research and development credit.

Labor-union officials had urged defeat of the bill as a matter of economic and social justice. They also said reduced revenue from an estate-tax cut could lead to reductions in federal programs for the poor, such as food stamps.

"We don't think minimum-wage workers should have to wait for millionaires to get another tax cut before they receive a long-overdue pay increase," said Bill Samuel, the AFL-CIO's legislative director.

In contrast, business lobbyists had supported it.

"While we have strong concerns about the minimum wage hike, we're supportive of permanent relief of the estate tax," said a letter to lawmakers from Dan Danner, executive vice president of the National Federation of Independent Business. "If Congress needs to address the federal minimum wage level this year, we believe it should be addressed in a package that also provides significant relief for small businesses. ... The bill does just that."

Business organizations have long opposed minimum-wage increases, arguing that the higher labor costs would force employers to lay off workers or eliminate some entry-level jobs. Opponents also say that prosperity is best generated by stronger economic growth rather than a mandated wage increase.

But business lobbyists said the trade-off between a lower estate tax and a higher minimum wage clearly favors the business community and upper-income Americans. The proposed reduction in the estate tax would have lowered federal tax revenue by $268 billion over the next decade, according to one estimate.

"Every closely held business in America today is either affected by the death tax or could be affected by it," one top business lobbyist said. "At the same time, less than 3 percent of the country's workers get paid at the minimum wage."

Also, the lobbyist said, "people in the business community understand that it is valuable to Republicans standing for election in November to demonstrate that they have compassion for folks at the lowest end of the economic ladder."

Copyright © 2006 The Seattle Times Company

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