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Republican maneuver fails
The scam to end the estate tax

By Elizabeth Schulte | August 11, 2006 | Page 2

OVER THE last decade, Congress has reduced the estate tax on the super-rich eight times. In that same period, the minimum wage has increased by...zero.

Congress tried to marry these hypocrisies when House Republicans tied estate and gift tax exemptions to a bill that would have increased the minimum wage from $5.15 to $7.25 an hour over three years.

Right before heading for vacation, an overwhelming majority of House members voted for the modified bill, but the measure was blocked in the Senate August 3 when it fell four votes short of the needed 60 on a procedural motion.

Republicans tried to paint both parts of the bill as a boon for working people. "We are turning our back on the middle class and poor people who depend on the minimum wage and death-tax relief," said Sen. Kay Bailey Hutchison (R-Texas), after the bill was defeated.

While the senator may think this will make great fodder for election campaign materials, it doesn't make a lot of sense. The minimum-wage increase would have directly increased the wages of some 5.6 million workers, according to the Economic Policy Institute. The estate-tax reduction would have affected just 8,200 rich individuals with exemptions of $3.5 million.

Plus, a less bragged-about provision of the bill would have drastically cut wages for workers in seven states where laws allow workers to keep their tips on top of making a minimum wage--as opposed to other states, where employers pay less than minimum, and tips are supposed to make up the difference.

In a provision sure to have made the National Restaurant Association happy, the provision would have pre-empted any state laws that require a minimum wage, instead stipulating that employers pay these workers a tip credit wage of just $2.13 per hour.

According to the Center for Budget and Policy Priorities (CBPP), even if the minimum-wage increase had gone into effect in January, this has been the longest period in U.S. history without an increase since the federal minimum wage was established in 1938. "In the nine years since the last minimum wage increase (1997), the value of the minimum wage has fallen by 20 percent, after adjusting for inflation," said a report by the CBPP's Aviva Aron-Dine. "This year, its purchasing power fell to its lowest level since 1955."

And the CBPP report adds, "In the absence of congressional action, the value of the minimum wage will only continue to deteriorate. By 2009, the purchasing power of the $5.15 an hour minimum wage will be about 25 percent below where it was when it first took effect in 1997."

Meanwhile, even without the recent bill, the exemption for taxing the estates of the super-rich is guaranteed to rise anyway--to $3.5 million for individuals ($7 million for couples) in 2009. The House bill merely attempted to make these changes take effect now, four years earlier than the 2001 estate tax bill.

The money lost in estate tax relief for the rich--$268 billion over the next decade, estimates the CBPP--has to come from somewhere. Most likely, it will be from federal programs for the poor, like food stamps, which minimum-wage workers depend on to feed their families.

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