WASHINGTON — Tax provisions in the landmark minimum wage bill passed by the Senate on Thursday have divided the California business community, pitting the interests of small businesses against large corporations.
The tax provisions were added to the legislation by Senate Democrats as a concession to small businesses and Republicans who initially opposed the bill, which would raise the federal minimum wage for the first time in a decade.
Under the bill, which passed the Senate by a 94-3 vote, the federal minimum wage would go to $5.85 from $5.15 an hour within 60 days after the legislation became law, then rise to $6.55 in 2008 and $7.25 in 2009. If the measure can be reconciled with a House version that passed without the tax package Jan. 10, millions of workers could see their wages increase in 21 states that pay the federal minimum, including three in the West: Idaho, Utah and Wyoming.
The new federal minimum wage would not affect California, where the state-mandated minimum rose to $7.50 an hour Jan. 1.
The Senate bill includes extensions of business tax credits, deductions and other new tax breaks totaling an estimated $8.3 billion over 10 years, designed to offset the effect on small businesses of a higher minimum wage.
To help pay for the tax breaks, the bill would raise revenue by preventing companies from deducting the cost of jury verdicts or settlements against them in liability suits and by capping executives' tax-deferred pay packages, among other changes.
California small-business owner Mike Horner said the proposed tax breaks would help him cover rising costs.
Horner is president of Pasadena-based Tom Sawyer Camps Inc., which runs summer and year-round after-school camps. The company employs 20 full-time staff and 200 seasonal workers, about 60% of whom earn minimum wage, Horner said.
The tax breaks include a one-year extension of a provision that allows small businesses such as Horner's to combine as much as $112,000 in expenses into one annual tax deduction.
They also would speed up the depreciation schedule for improvements to restaurants and retail properties -- where most minimum-wage workers are employed -- and extend for five years a tax credit for businesses that hire low-income or disadvantaged workers.
Horner said he relied on one of the tax provisions extended in the Senate bill to deduct the $200,000 cost of buying 10 passenger vans in the last two years.
