August 3, 2006

Senate Democrats block wage, tax bill

By Richard Cowan

WASHINGTON (Reuters) - Democratic senators blocked their
own goal on Thursday of raising the U.S. minimum wage for the
first time since 1997 after Republicans added a huge tax break
for the rich to the legislation, actions sure to reverberate in
this election year.

On a 56-42 vote, the Republican-led Senate failed to get
the 60 votes needed to clear the way for final congressional
passage of the minimum wage increase and a big cut in
inheritance taxes for wealthy Americans.

The hard-fought battle was a defeat for Senate Majority
Leader Bill Frist of Tennessee, a possible 2008 Republican
presidential candidate, who crafted the package last week with
fellow Republicans in the House of Representatives.

The House had already approved the bill to raise the
$5.15-per-hour minimum wage to $7.25 over three years.

Democrats, who have long pressed for a somewhat stronger
minimum wage increase, have vowed to keep pushing for the pay
raise, making it a centerpiece of their effort to take control
of the Congress in the November election.

"They (Republicans) can get 6.6 million Americans an
increase in their basic minimum wage as long as we promised
that the fattest of cats in America would get a great big bowl
of tax cuts," said Sen. Richard Durbin of Illinois, the
second-ranking Democrat in the Senate.

Organized labor blasted the Republican maneuvering and
called on Congress to approve a stand-alone minimum wage
increase to help keep some low-paid workers out of poverty.


AFL-CIO President John Sweeney said the proposed estate tax
reduction, estimated to cost hundreds of billions of dollars,
would have led to cuts in health care, food stamps and other
government benefits and "end up hurting the very same people
that a minimum wage increase is supposed to help."

Frist countered that the failed package was "important to
millions of hard working Americans." And he said the "death
tax" on inherited wealth has meant "90 percent of family
businesses do not survive that third generation" because they
cannot afford the taxes or the cost of finding tax shelters.

Frist's high-stakes election-year gamble drew criticism
even from some in his own party. "The process was lousy and
offensive," said Sen. Charles Grassley of Iowa.

Earlier this year, Frist also lost on two other issues
important to his conservative base: constitutional amendments
to ban flag-burning and same-sex marriage.

But Republicans hope just raising these issues will help
energize supporters in the run-up to the November vote.

The Senate also blocked a one-year renewal of a series of
popular tax breaks that expired late last year, including a
state and local sales tax deduction, a research and development
tax credit and a deduction for college tuition.

The one-year renewal could be resurrected in September.

The Republican plan would have eventually excluded estates
valued at up to $5 million per individual, or $10 million for
married couples, from any taxes.

Estates over $5 million to $25 million would have been
taxed at 15 percent and anything over $25 million at 30

President George W. Bush's 2001 tax cut included a
phase-out of the estate tax, with full repeal lasting only for
the year 2010. If Congress does not pass a new reduction, the
tax would go back to the top rate of 55 percent on estates over
$1 million in 2011.

(Additional reporting by Joanne Kenen and Donna Smith)