Rangel to Add `About $1 Billion' in Tax Cuts to Wage Measure

By Ryan J. Donmoyer

Feb. 7 (Bloomberg) -- House Ways and Means Committee Chairman Charles Rangel said his panel would include some tax breaks for small business in a measure increasing the minimum wage.

``It'll be about $1 billion,'' said Rangel, a New York Democrat. He said the panel would vote on the measure Feb. 12.

Rangel said no decision had been made on which of the $8.3 billion in tax breaks in a Senate-passed version of the legislation would be included in the House measure. Final legislation will need to be approved by House and Senate negotiators next month.

``The Senate-passed package is larger, of course, than what he's proposing, so we'll still have to work that out between the two chambers,'' said Montana Senator Max Baucus, the Democratic chairman of the Finance Committee. The House and Senate each have approved boosting the minimum wage to $7.25, the first such increase in a decade.

Until yesterday, Rangel and House Democrats had insisted that Congress pass a minimum-wage increase without including tax incentives. Republicans say the breaks are necessary to help small businesses offset the cost of paying a higher wage, and Baucus said the wage increase wouldn't pass in the Senate without them.

The administration applauded Rangel's offer. ``It's a positive sign that Chairman Rangel is talking about accepting some relief for small business,'' said Rob Portman, director of the White House's Office of Management and Budget.

Still, Rangel said he hoped the final negotiations would still produce a minimum-wage increase that isn't linked to tax cuts.

May Be `Clean'

``The bill may come out clean anyway,'' Rangel said. He said ``you can't tell'' what the measure would look like once it goes through a conference committee of House and Senate lawmakers.

Representative Jim McCrery of Louisiana, the senior Republican on Ways and Means, said Rangel's offer of ``a compromise on this issue is good politics and good public policy.''

The Senate measure includes an extension until 2010 of the Work Opportunity Tax Credit, which benefits companies such as Wal-Mart Stores Inc. and Olive Garden restaurant owner Darden Restaurants Inc. that hire workers on welfare. The legislation offsets the cost of the tax breaks with about a dozen revenue- raising proposals, including a $1 million limit on executive compensation that qualifies for tax-deferred status.

Expenses

Other tax provisions in the Senate measure would expand to $112,000 the amount of expenses small businesses can claim in a year, up from $100,000 currently. It also offers tax incentives to retailers and restaurants that remodel space they lease.

Other incentives in the Senate measure would penalize companies such as Nabors Industries Ltd. that reincorporated in Bermuda to save on U.S. taxes while continuing to operate out of the United States. A retroactive penalty for companies such as Wachovia Corp. that claimed tax deductions from depreciating publicly owned infrastructure they claimed to be leasing would also apply.

Rangel said he hasn't decided on the content of the House measure. ``We have some options.''

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net ;

Last Updated: February 7, 2007 18:21 EST

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