“Small Business” Tax Package in Senate Minimum Wage Bill Poses Fiscal Risks

Publication Date: February 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Aviva Aron-Dine

Research Area: Banking and finance; Labor

Keywords: Economic projections; Federal budget; Tax code; Corporate finance

Type: Report

Abstract:

On February 1, the Senate passed a minimum wage bill that includes a package of business tax cuts. The cost of these tax cuts is $8.3 billion over the ten years from 2007 to 2016. On February 16, the House of Representatives passed a much smaller package of business tax cuts, the cost of which is $1.5 billion between 2007 and 2016 (and $1.3 billion between 2007 and 2017[1]). House Democratic leaders have explained that, while they would prefer to see Congress pass a “clean” minimum wage bill, they were willing to approve a smaller tax-cut package in order to reach agreement with the Senate. The costs of both the House and the Senate tax packages are offset, as is required under the Pay As You Go budget rules recently reintroduced in the House. (Under PAYGO, the costs of legislation that reduces revenues or increases entitlement spending must be paid for.) Some may conclude that, because the tax cuts are paid for, they raise no concerns from the perspective of fiscal responsibility. This view is too simplistic.