U.S. CONGRESS MULLS TAX BREAKS TO EASE WAGE HIKE

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SAIPAN, CNMI (Saipan Tribune, ) – In a move seen to boost the passage of the federal minimum wage hike bill, the U.S. House Ways and Means Committee has reportedly approved "a modest package of tax breaks" for small businesses affected by the proposed wage increase.

A Washington Post report on Feb. 13 said the committee, chaired by congressman Charles B. Rangel (D-N.Y.), agreed to expand and extend a handful of tax credits and deductions worth US$1.3 billion over 10 years. The full House is expected to vote on the measure later this week, the report said.

It said the House tax package is far less generous than the US$8.3 billion package approved by the U.S. Senate earlier this month under pressure from that chamber's Republicans, who refused to support a minimum-wage increase unless it included tax relief for small businesses.

The U.S. House-introduced wage hike bill, H.R. 2, which seeks to raise the federal minimum wage in the U.S., including the CNMI, to US$7.25 per hour, passed the Senate but with amendments providing tax breaks for small businesses.

"With both houses now willing to go along with tax breaks, congressional aides said it was just a matter of resolving the details," the report said, quoting a staff of Senate Minority Leader Mitch McConnell (R-Ky.). "The bottom line is, it's moving in the right direction."

House Democrats had earlier argued that after six years of tax cuts from the Bush administration, businesses needed no additional help.

However, the push to approve such a bill failed in the Senate, which instead overwhelmingly approved the wage hike with tax relief. House leaders quickly reconsidered their hard-line stance, and Rangel and the ranking Republican on Ways and Means, Jim McCrery of Louisiana, introduced their own tax package late last week.

Yesterday, after less than 30 minutes of discussion, the committee unanimously approved the package. It would extend for one year a tax credit for employers who hire former welfare recipients, at-risk youth, and other targeted groups. Like the Senate bill, the House measure would expand the credit to apply to military veterans. The bill would also extend for one year a law that allows small businesses to quickly deduct US$112,000 for equipment purchases, and would raise the deduction amount to US$125,000.

The House bill would also adjust a tax credit paid to restaurant owners whose workers earn more than the minimum wage when cash tips are counted. That change would ensure that restaurant owners continue to receive the same tax benefit after a higher minimum wage is enacted.

To pay for the changes, the House bill would prohibit dependent children who do not support themselves from claiming the lowest tax rate for capital gains and dividends. That measure is aimed at preventing wealthy taxpayers from sheltering income from taxation by shifting it to their children. And the bill would require businesses with assets over US$1 billion to pay more in estimated taxes in 2012, though all the excess payments would be returned to them in 2013. The temporary bump in revenue would cover the cost of the tax breaks through their most expensive period.

In a statement, McCrery called the package "a better balance of targeted tax relief and sensible offsets than the Senate has approved," adding that he had "serious concerns" about the Senate's proposal to impose new limits on deferred-compensation plans, one of the most popular executive benefits in corporate America.

The Fair Minimum Wage Act, authored by Democrat Rep. George Miller would raise the federal wage floor by US$2.10 from its current US$5.15 an hour in three steps over 26 months.

In the CNMI, it would raise the minimum wage by US$1.50 from the current rate of US$3.05 per hour in the first year, and 50 cents every six months thereafter until it equals the federal level.

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