WASHINGTON -- The U.S. Senate on Thursday passed a bill, The Small Business & Work Opportunity Act of 2007, to boost the federal minimum wage to $7.25 an hour and provide businesses $8.3 billion in tax breaks to offset cost of the higher payrolls, reported Dow Jones.
The Senate's 94 to 3 vote came after two weeks of deliberations on the bill to boost the minimum wage from its current $5.15 an hour, the first increase in nearly a decade.
The House on January 10 voted 315 to 116 to approve a minimum wage increase without any [image-nocss] tax cuts.
The tax benefits range from a tax credit for hiring welfare recipients to enhanced expense writeoffs and are aimed at helping businesses offset the cost of the minimum-wage hike. But the tax package has gained more attention because of offsetting revenue increases.
The president and the Republican Congress were clear on the need to couple an increase in the minimum wage with small-business tax relief, and this legislation does just that, Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement.
One item in the proposal would have provided more generous expense writeoffs for small businesses under Section 179 of the tax code. The Senate Finance Committee's tax package, approved by the panel last month, included a one-year extension of this benefit, which expires Dec. 31, 2009. Sen. Jon Kyl (R-Ariz.) unsuccessfully sought to extend this benefit for two additional years, through Dec. 31, 2012, at a cost of $2 billion. Kyl's amendment was rejected by the Senate on Wednesday.
Other tax relief approved by the Senate on Thursday would extend for five years the Work Opportunity Tax Credit designed to offset the cost of hiring disadvantaged workers, such as disabled veterans. This tax break, first enacted during the Clinton administration, would reduce federal tax revenue by $3.6 billion over 10 years.
The bill also would allow retailers and restaurant owners to more quickly write off the costs of remodeling leased buildings. To offset the cost of these provisions, the bill contains several significant corporate-tax provisions aimed at halting tax abuses.
The National Restaurant Association commended senators for including tax relief for restaurants in its minimum wage legislation.
The legislation includes several beneficial provisions for small businesses, including restaurants. The provisions include $1.7 billion for a 15-year restaurant depreciation schedule (including new construction, leaseholds and improvements); a five-year extension of the Work Opportunity Tax Credit (WOTC); and a one year extension through 2010 for small-business Sec. 179 small business expensing.
While no package can completely mitigate the impact of a minimum wage increase, we commend the Senators for recognizing the importance of granting small businesses the necessary resources to partially offset the consequences, said Steve Anderson, president and CEO of the group. The nation's restaurants will serve over 70 billion meals in 2007 and have an overall economic impact of more than $1.3 trillion. By allowing restaurateurs to deduct the cost of renovations or new construction on a shorter schedule, this legislation will help many restaurateurs to continue to grow their businesses and create more jobs.
He added, 70% of the nation's restaurants are small businesses. The impact of the proposed minimum wage increase is expected to be significant, affecting restaurant employers, employees and the millions of customers they serve. Research indicates that when the minimum wage is raised, prices go up and job opportunities go down.
After the last wage hike in 1996 and 1997, according to a nationwide National Restaurant Association survey of 1000 restaurants, 146,000 jobs were cut from restaurant payrolls and operators postponed plans to hire an additional 106,000 employees. In nationwide surveys conducted in October 2006, restaurant operators reported that they plan to take a number of actions if the federal minimum wage was increased from $5.15 to $7.25 over the course of 30 months:
The most common action planned by restaurant operators would be an increase in menu prices, with nearly nine out of 10 operators saying they would increase menu prices as a result of a $2.10 minimum wage increase; 98% of quick service operators said they would increase menu prices, compared to about three out of four family dining and casual dining operators. In addition to job losses, roughly one-half of restaurant operators said they would reduce the number of employee hours worked. Approximately one out of four restaurant operators said they would postpone plans for new hiring if the federal minimum wage rose to $7.25 over the course of 30 months. Approximately three out of 10 restaurant operators said they would cut employee benefits as a result of a minimum wage increase from $5.15 to $7.25. In general, the largest impact would be seen in the quick-service, family dining and casual dining segments, with fine dining experiencing a comparatively smaller impact.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.