As we go to press, it is possible the U.S. House of Representatives and Senate will have reconciled differences between their respective tax proposals that include increases in the federal minimum wage, and the Fair Minimum Wage Act of 2007, HR 2, could be on its way to the president's desk. But the manner in which the minimum wage hike was turned into a tax bill provides an instructive pattern for NRCA members that could be repeated during the 110th Congress.
During the first 100 legislative hours of the 110th Congress, Speaker of the House Nancy Pelosi (D-Calif.) pledged "to pass key measures affecting the everyday lives of all Americans." A major component of this agenda was raising the minimum wage, and on Jan. 10, the House passed HR 2 to raise the minimum wage from $5.15 to $7.25 per hour during a two-year period. The House passed the measure as a stand-alone bill with no benefits for small businesses, and Pelosi and her allies demanded the Senate also pass HR 2 with no amendments attached.
But the Senate, with 51 Democrats and 49 Republicans, cannot pass legislation strictly along party lines because 60 votes are needed to invoke cloture and end unlimited debate. Republicans have the votes to prevent cloture and insisted HR 2 be paired with tax breaks aimed at helping small businesses. This led the Senate to craft a tax package that could obtain enough votes and be added to HR 2.
On Feb. 1, the Senate passed HR 2 by a vote of 94-3, agreeing to include an $8.3 billion package of tax incentives. The bill would extend the Work Opportunity Tax Credit for five years for employers who hire from eight categories of workers listed by the U.S. Department of Labor; raise to $10 million the gross receipts threshold for businesses to qualify to use the cash method of accounting; extend through 2010 the Section 179 expensing provision that allows small businesses to deduct as much as $112,000 annually from income in new capital investments; broaden the pool of companies that can organize as Subchapter S corporations; and extend shorter tax depreciation schedules for restaurant and leasehold improvements to a wider audience through March 31, 2008.
NRCA is an advocate for a tax depreciation schedule for commercial roof systems that is shorter than the current 39-year schedule and supports the Senate's broader approach to depreciation for construction. It would allow the 15-year schedule in effect this year for improvements to existing restaurants and leased property to apply to retailers who improve property they own and those who build new restaurants.
House bill
When House Democrats ultimately realized a stand-alone minimum wage bill could not get through Congress, they passed HR 976, the Small Business Tax Relief Act of 2007, on Feb. 16. With $1.3 billion in tax cuts, it is much slimmer than the Senate version; however, there are areas of commonality, such as extending the Section 179 expensing provision that could be the basis for a compromise tax bill. But on Feb. 20, Sen. Charles Grassley (R-Iowa) warned he might block a House-Senate conference on the minimum wage bill unless Senate Democrats push for the larger $8.3 billion tax-cut package.
The one policy area where NRCA and other construction associations support the House involves immigration—the Senate added an amendment to its package that would bar companies employing illegal immigrants from receiving government contracts for up to 10 years. This language was not properly vetted and could ensnare contractors for minor paperwork violations. Furthermore, it fails to give employers a fully functional employment eligibility verification system while denying them the right to appeal.
Influence
The House majority leadership's newfound willingness to add tax cuts to HR 2 reflects the influence the Senate's Republican minority can have on congressional legislation. Despite the regrettable Senate amendment to the package on immigration enforcement, this is a pattern that should benefit NRCA members most of the time. However, if Republicans lose more Senate seats in 2008 and Democrats take control of the White House, this leverage could be eroded greatly.
Craig S. Brightup is NRCA's vice president of government relations.
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