By Kristina Peterson, Richard Rubin and Eric Morath
WASHINGTON -- Senate Democrats began preparing a backup plan
Friday for raising the minimum wage at some large companies as part
of their coronavirus relief package, after the chamber's
parliamentarian ruled out including a broader increase.
Backed by Senate Majority Leader Chuck Schumer (D., N.Y.), two
committee chairmen are working on a new, more limited proposal that
would use the tax system to prod employers to raise wages.
The plan would impose tax penalties on large companies that
aren't paying the higher wage Democrats seek and create tax
incentives for small companies to do so. Democrats hope the
chamber's parliamentarian would allow them to include the modified
plan in the coronavirus relief package.
The tax plan is being developed by Senate Budget Committee
Chairman Bernie Sanders (I., Vt.) and Senate Finance Committee
Chairman Ron Wyden (D., Ore.), and they haven't finalized the
Mr. Wyden said Friday the proposal would impose a 5% penalty on
the total payroll of a large corporation if it pays any workers
below a certain amount, which he didn't specify, with the penalty
increasing over time. The plan would also provide small businesses
that pay their employees higher wages with an income tax credit
equal to 25% of wages, capped at $10,000 per employer a year.
But Mr. Wyden didn't specify how large a company would have to
be before it would face the tax, or how small it would have to be
to get the credit.
"I've been working on a 'plan B' that would make big companies
pay for mistreating their workers," Mr. Wyden said in a statement
Friday of the effort to increase the minimum wage.
Mr. Sanders has said he is working on pushing companies to pay
$15 an hour through a tax plan.
Mr. Schumer is looking at adding the tax measure to the
coronavirus bill, according to a senior Democratic aide.
Some large employers, including Amazon.com Inc. and Costco
Wholesale Corp., have already pay at least $15 an hour, while
others, such as Walmart Inc., haven't.
Employers would have to decide whether they would fare better by
raising wages to avoid the tax or by paying it. That decision would
depend on the tax, the wage target and the cost of bringing the
fraction of employees below that level up to it.
The Retail Industry Leaders Association, which represents large
companies, called Mr. Wyden's proposal a terrible idea. Republicans
criticized the proposal as a tax increase that would harm
businesses and reduce employment.
"It seems ludicrous to tax people for a job-killing measure,"
said Rep. Kevin Brady of Texas, the top Republican on the House
Ways and Means Committee. "Makes no sense at all."
White House press secretary Jen Psaki said the Biden
administration had not yet reviewed the tax proposal. "We are
looking for the best ways to increase the minimum wage," she told
The impact of the tax proposal would depend on some of the still
unspecified details, including whether the penalties apply to a
handful of very large corporations or to a broader set of
It also might have relatively little impact in some sectors such
as fast-food, which are dominated by a franchise model. In those
areas, the larger companies such as McDonald's Corp. aren't always
the employers. Instead, the franchisees tend to be smaller and
regionally based, meaning that they may be able to keep wages near
current levels without facing a tax increase.
Jonathan Meer, an economist at Texas A&M University, said
the proposal would incentivize large companies to outsource
The plan appears to be a "really complicated, Rube-Goldberg-like
attempted solution to a pretty simple problem," he said.
The tax proposal might also be unclear for workers and could be
easily reversed by future congresses, said Ben Zipperer, an
economist at the Economic Policy Institute, a liberal-leaning think
"If small businesses are exempted, then it means many low-wage
workers won't see a pay increase," he said. "Larger firms, in
general, already pay more than small businesses."
To advance, the tax proposal would first have to secure the
approval of all 50 members of the Senate Democratic caucus, who are
using a process tied to the budget known as reconciliation to
enable them to pass the $1.9 trillion aid bill with just a simple
majority, rather than the 60 votes most bills need. That would
enable them to pass the legislation without GOP support, so long as
they don't lose any votes among their own ranks in the
Using the reconciliation process requires that measures be
closely tied to the budget. The Senate parliamentarian on Thursday
ruled that Democrats' initial proposal to raise the federal minimum
wage to $15 an hour over four years didn't comply with those
It was unclear Friday how centrist Democratic senators Joe
Manchin of West Virginia and Kyrsten Sinema of Arizona, who opposed
including a broad $15 increase in the package, would view the tax
proposal. Mr. Manchin's office declined to comment and Ms. Sinema's
office didn't immediately respond to a request for comment.
Even if Senate Democrats were to unite around the proposal,
progressive House Democrats said Friday that the tax proposal would
be insufficient and that they would still press for a federal
minimum wage increase.
"I'm very supportive of doing whatever we can, but at the end of
the day we promised a $15 minimum wage, so if that $15 minimum wage
isn't in this package, we are going to have to figure out a way to
get it through, " Rep. Pramila Jayapal (D., Wash.), chairwoman of
the Congressional Progressive Caucus, told reporters Friday.
She declined to say how she would vote on the coronavirus relief
package if it included the tax proposal but not the broader
increase in the federal minimum wage.
(END) Dow Jones Newswires
February 26, 2021 23:08 ET (04:08 GMT)
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