Democrats Shelve Tax Penalty Aimed at Raising Minimum Wage

(Bloomberg) -- Senate Democrats are shelving an effort to raise minimum wages for workers as part of the $1.9 trillion virus relief package that passed the House on Saturday, according to two people familiar with the matter.

The plan included tax penalties on big companies that pay low wages along with incentives for smaller companies. It had been floated by Senate Finance Chairman Ron Wyden and Budget Chairman Bernie Sanders after the Senate parliamentarian ruled Thursday that raising the federal minimum wage to $15 an hour failed to qualify under fast-track budget rules that Democrats are using to pass the stimulus bill without Republican support.

It became clear over the weekend that getting all 50 senators in the Democrats' caucus to agree on language for the reworked minimum-wage proposal would delay passage of the relief plan and risk breaching the March 14 deadline for extending expiring pandemic unemployment benefits, said one of the people, who spoke on condition of anonymity to describe private discussions.

Democrats will continue to look at all other legislative options for raising wages, including potentially using the fast-track budget process known as reconciliation for a second time, the person said.

The Democrats' shift was reported earlier Sunday by the Washington Post.

Read more: Corporate-Tax Proposal in Senate Stokes Economists' Concern

The tax incentive plan had failed to get an endorsement from President Joe Biden, while some top economists voiced skepticism about whether it would work. While the failure to pass a minimum-wage hike in this bill would disappoint progressive Democrats in particular, they have few options to force the issue unless they're willing to risk the entire relief package as the unemployment funding cliff nears.

Even though Democrats are united on raising the minimum wage, they aren't unanimous on what level to set. President Joe Biden has proposed phasing in an increase to $15 an hour from the current $7.25, while Senator Joe Manchin of West Virginia has proposed an increase to $11 over two years and then increasing it at the rate of inflation.

Given that Democrats need all 50 votes in their caucus to pass the stimulus bill, just one defection, such as Manchin, could sink the whole package.

New York Representative Alexandria Ocasio-Cortez, the leader of a group of young, vocal progressives, has urged Senate Democrats to overrule the parliamentarian and get rid of the rule that gives the minority power to block most legislation. She hasn't explicitly threatened to scuttle the broader stimulus bill if the minimum-wage hike isn't included.

The administration has shown no interest in overruling the parliamentarian. If it did, it would risk losing support for the package from Manchin and another moderate Democrat, Kyrsten Sinema of Arizona.

In the House, Speaker Nancy Pelosi, who lost two moderate Democrats during Saturday's vote, can only afford to lose two more if all members are voting and still pass it. Progressives in the chamber have made the minimum wage hike a signature issue as they angle to set the party's future direction.

“Really our options right now, at least our immediate options on this specific issue, is to do something about this parliamentary obstacle or abolish the filibuster,” Ocasio-Cortez said on Friday.

The last time Congress voted to increase the minimum wage was in 2007, when a measure phasing in the $7.25 level from $5.15 an hour was attached to a war-funding bill by Pelosi and signed by President George W. Bush.

A group of Republicans has proposed phasing in a $10 minimum wage tied to a requirement that employers electronically verify the immigration status of their workers.

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