President Clinton on March 8 released a report by the White House National Economic Council (NEC) that concluded a $1.00 increase in the minimum wage over two years would potentially benefit more than 10 million American workers without having a negative effect on the economy or employment.

Clinton, at a March 8, 2000 White House event held on the eve of a House vote on minimum wage legislation, repeated his pledge to veto any bill that makes workers wait an additional year for the full increase or if it is linked to "risky tax cuts."

Democratic congressional supporters of a minimum wage hike over two years want to substitute the Republicans' more ambitious 10-year tax cut package, the Small Business Tax Fairness Bill of 2000 (HR 3832), with a smaller relief bill targeted to small businesses. Republican House leadership has proposed spreading the minimum wage increase over three years and does not like the Democratic tax increases through the closing of corporate loopholes and tax shelters. A vote in the House is expected March 9.

Citing the NEC report, Clinton noted at the March 8 event that raising the minimum wage would increase the earnings of a full-time worker by approximately $2,000 a year and restore the real value of the minimum wage to what it was worth in 1982. According to the NEC study, "when the minimum wage was fixed from 1981 to 1990, the wages and incomes of poorer workers fell in real terms. Moderate increases in the minimum wage have provided meaningful additional earnings for many of America's hard-pressed families with no discernible negative employment effects."

For a full-time worker, a two-year, $1.00 increase would translate into enough money to purchase nearly seven months of groceries or five months of rent, Clinton noted.

Recent research has also suggested that higher wages can increase employment because they increase employers' ability to attract, retain, and motivate workers, the NEC study noted.

The president said that since the minimum wage was last increased in 1996, 10 million more jobs have been created. Clinton said that the NEC study "puts to rest any of the lingering myths about the minimum wage" causing unemployment or benefiting primarily "teenagers working for gas money." He noted that 70 percent of minimum wage earners are adults and nearly half work full-time.

Small Business Tax Cut Proposals
Each party's tax cut/minimum wage bills would provide a 100 percent health insurance deduction for the self-employed, an increase in Code Sec. 179 expensing, an increase the business meal deduction, changes in pension laws, and an exclusion for post secondary educational benefits provided for an employee’s children.

Among the differences between the proposals, the GOP bill would include a reduction of the top estate tax rate of 55 percent to 50 percent by 2002 and of all rates by 1 percent in 2003 and 2004, the creation of 15 new renewal communities with targeted pro-growth tax initiatives, and a repeal of the installment method of accounting for accrual basis taxpayers, effective for sales or other dispositions on or after December 17, 1999.

The Democratic alternative would only eliminate estate taxes on family-owned farms and businesses worth up to $4 million. The installment repeal provision previously had been supported by the Democratic leadership in different stand-alone bipartisan legislation.

House Ways and Means Committee ranking member Charles B. Rangel (D-N.Y.) said at a March 8 briefing that the GOP small business tax relief bill would cost more than $122 billion over 10 years, using the projected surplus. In contrast, the Democratic alternative would cost only $36 billion over 10 years and is almost completely offset with provisions "that crack down on tax shelters and abuses."

"The Republican leadership continues to show total disregard for fiscal responsibility," Rangel said. He called the bill a tax break "for the super rich."

Republican National Committee Chairman J.C. Watts (R-Okla.) praised the bill’s inclusion of a provision to create 15 new renewal communities (at least three must be in rural areas) with targeted, pro-growth tax initiatives to create jobs, encourage personal savings, foster home ownership, and clean up neighborhoods on former industrial sites so new business can grow.

"You have to dream big dreams if you’re going to tackle poverty. That’s what we did with the American Community Renewal Act more than five years ago, and it looks like we are well underway in making it a reality," Watts said in a release.

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