WASHINGTON—Representatives of the tire and general business sectors are leery of the different minimum wage hike/small business tax cut bills passed by the House and Senate. Although they appreciate the tax breaks for small businesses, they feel a minimum wage increase is at best counterproductive for the economy. Furthermore, they note President Clinton's threat of a veto should either of the packages pass Congress unchanged.
The International Tire and Rubber Association thinks it's just as well if the president carries out his threat, for the tax breaks won't erase the burden of a higher minimum wage, said Roy E. Littlefield, ITRA director of government affairs.
"These are very, very difficult times for small business, and profit margins are razor-thin," Mr. Littlefield said. "It's not that our people pay minimum wage, but when you raise the minimum wage, you raise the bar across the board."
The Tire Association of North America is "still looking" at both packages to determine which, if any, it will support, said Ross Kogel, TANA interim executive vice president.
TANA is a member of the Small Business Legislative Council, which estimates that the latest increase in the minimum wage has cost the working poor 199,000 jobs and businesses $31 billion in payroll costs since its passage four years ago, Mr. Kogel said. "We're split as to these bills and their effects," he said. "There are parts of these bills that will help our members, and parts which will hurt them."
The Rubber Manufacturers Association was similarly noncommittal.
"Like all members of the business community, we will be watching the developments on the minimum wage package closely," said Ann Wilson, RMA vice president of government affairs. "We will particularly be watching the tax package and offering assistance as it becomes appropriate."
As for the U.S. Chamber of Commerce, it "has taken a position that we oppose a minimum wage hike of any amount over any period of time and are highly in favor of tax cuts," a spokeswoman said.
The House bill, passed 282-143 on March 9, increases the minimum wage $1 over two years, to $6.15 per hour from $5.15. It also offers tax breaks for small business, worth $45.7 billion over five years and $122.7 billion over 10, including: a reduction in the top rate of the estate tax to 50 percent from 55 percent by 2002, with a 1-percent decrease in all other brackets; and a change in the deductibility of health insurance premiums for the self-employed, making them fully deductible in 2001.
The Senate passed its own minimum wage/tax cut package in November, as part of a bankruptcy reform bill. That legislation would phase in the $1 minimum wage hike over three years.
The Senate bill, worth $18.4 billion over five years and $75 billion over 10, does nothing to reduce the estate tax. But it makes total deductibility for self-employed health insurance premiums immediate. It also removes the 0.2-percent federal unemployment surtax, which otherwise runs until 2007, and it grants a permanent extension of the work opportunity tax credit, which gives employers a tax break on the first-year wages of handicapped or minority employees.
Both bills are identical in some respects, such as increasing the equipment expensing allowance to $30,000 from $19,000.
The House and Senate must still set a date to begin a conference on how to reconcile their tax packages. The Clinton White House, meanwhile, has said all along it will not approve either package, and blasted congressional Republicans for tying the minimum wage increase to tax cuts.
On March 10, however, President Clinton said he had received "some encouraging signals" on reaching a compromise with congressional leaders. He did not go into details as to what those signals were.