4, 2006 Volume
107 Number 15
Minimum wage bill would cut pay for tipped workers
In the dead of night July 29, the Republican-led U.S. House of Representatives passed a massive multi-issue bill — without having read it.
The bill, House Resolution 5970, contained a tax giveaway to wealthy heirs and heiresses, an increase in the federal minimum wage, and a sizable pay cut for workers who earn tips in seven states, including Oregon and Washington.
The bill, titled the Estate Tax and Extension of Tax Relief Act, passed 230 to 180, and was the last act of the House before it broke for summer recess.
It would exempt $5 million of an individual’s estate and $10 million of a couple’s from taxation by 2015, resulting in an estimated $80 billion a year cut in federal revenues. It also would raise the federal minimum wage by $2.10 over a three year period.
The bill faced an uncertain future in the Senate as of press time, with Republican Senate Majority Leader Bill Frist promising a vote on it Aug. 4 and Democratic leaders opposing it.
Congressman David Wu was the only Oregon Democrat to vote for the bill. His office did not immediately return calls seeking an explanation of his vote.
“We find his vote perplexing to say the least,” said Tom Chamberlain, president of the Oregon AFL-CIO.
The national AFL-CIO and the Change to Win labor federation opposed the bill.
The Oregon AFL-CIO helped pass a 2002 ballot measure that raised Oregon’s minimum wage and indexed it annually to inflation. Since then, the labor federation has defended the law in the Legislature from attempts by the Oregon Restaurant Association to pass a sub-minimum wage for workers who receive tips.
Federal law allows states to set a higher minimum wage, and also allows states to determine whether tips given by the public can count toward the minimum wage employers are required to pay. Most states allow this “tip credit,” which permits employers to pay just $2.13 an hour if tips take the employee up to the federal minimum wage of $5.15 an hour. Seven states — Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington — require employers to pay the full minimum wage to tipped employees.
Thus, the House bill would cut the pay of tipped workers in those states by up to $5.50 an hour. There are approximately 32,000 employees who work for tips in Oregon.
If it passes the Senate, it would be the first time in history that the federal government would put a ceiling on minimum wage levels, rather than establishing a national floor from which the states can make improvements.
HR 5970 would raise the federal minimum to $7.25 an hour over a period of three years. Oregon’s minimum is currently $7.50 an hour, and Washington’s is $7.63, so workers in those states wouldn’t benefit from the increase in the House bill.
The federal minimum wage has stood at $5.15 an hour since Sept. 1, 1997, and is at its lowest level in buying power since 1949. Since the inception of the minimum wage, there has been only one other period (from 1981 to 1990) in which the minimum wage has remained unchanged for more than eight years. Faced with federal inaction, 22 states have a higher-than-federal minimum wage.
Polls say an increase in the minimum wage is popular with the public.
The minimum wage has become a highly partisan issue in Congress, with Republicans blocking any increase in the federal minimum for years on end, even as they vote to increase congressional salaries. HR 5970 had the votes of 196 Republicans and 34 Democrats, while 158 Democrats and 21 Republicans voted against it.
Republican leaders knew Democrats would vote against it because of the $400 billion in tax cuts to the wealthy and other objectionable provisions. It’s the “poison pill” strategy of legislation: propose something your opponents agree with and then add things they can’t agree to vote for.
“Anybody who voted for this should be ashamed of themselves,” Chamberlain said.
Southwest Washington Congressman Brian Baird voted neither for it nor against it, instead voting “present” — the only representative to vote that way. Baird spokesperson Meghan O’Shaughnessy said voting “present” was a way to protest the way the bill was presented. O’Shaughnessy said Baird supports the estate tax cut and the minimum wage increase.
In a press statement, Baird railed against what he called “eleventh hour partisan political games.”
“It is an insult to the American people and to the democratic process itself that bills costing hundreds of billions of dollars and amounting to thousands of pages of major policy decisions were hijacked for election-year political gain and brought up for an eleventh hour vote with virtually no debate. Each of these bills alone deserved at least an entire day of debate.”
Members of Congress had less than six hours to read the bill, which was 1,400 pages and contained dozens of unrelated tax provisions.
Springfield Congressman Peter DeFazio called the bill a “truly cynical exercise.”
“The Republican majority said they would agree to a modest phased increase in the minimum wage if we would give huge tax breaks to the wealthiest of the wealthy,” DeFazio said. “So it’s Christmas in July for the wealthy, but it’s April Fools for working American who will have to pay $80 billion a year in taxes so the likes of Paris Hilton will get more tax cuts.”
Mike Leachman, economist with the Oregon Center for Public Policy, said the estate tax provisions of the bill would add substantially to the federal budget deficit. In the last five years, President Bush and the Republican leadership in Congress have repeatedly cut taxes on the wealthy while increasing government expenditures. The result has been record deficits and federal borrowing.