GOP Bid On Wages, Estate Tax Is Blocked - Democrats Prevent Vote on Senate Bill

By Charles Babington
Washington Post

Senate Democrats blocked a Republican bid to combine a tax cut for the wealthy with a wage increase for the working poor last night, adding a volatile economic issue to this fall's congressional campaigns.

GOP leaders fell three votes short of the 60 needed to cut off debate and bring the package to the Senate floor, where it was considered certain to pass on a simple-majority vote. Republicans said Democrats will pay a price in November, contending that most Americans support the bill's call for an increase in the minimum wage and deep cuts in the estate tax.

But Democrats said rich Americans have received enough breaks from the Bush administration and the GOP-led Congress. Voters, they said, will see the Republican-backed bill as a ploy to further enrich upper-income families while trying to usurp the Democrats' role as champions of the working poor.

Under the bill, "8,100 of the wealthy and well-off hit the jackpot, while millions of working families get $800 billion in [federal] debt," said Minority Leader Harry M. Reid (D-Nev.), who led the opposition to the measure.

The official Senate tally was 56 to 42 in favor of proceeding to a vote on the wage-and-tax bill, short of the 60 required. Senate Majority Leader Bill Frist (R-Tenn.) supported the package but switched his vote -- reducing the final number to 56 from 57 -- to enable him to seek a reconsideration later. Republicans Lincoln D. Chafee (R.I.) and George V. Voinovich (Ohio) joined one independent and 38 Democrats -- including the two from Maryland -- in opposing the bill by backing the filibuster. Four Democrats and 52 Republicans -- including Virginia's two senators -- signaled their support for the bill by voting to limit debate.

Republican leaders in Congress have long wanted to eliminate or slash the taxes levied on estates left by wealthy people, but the Senate has repeatedly refused. Hoping to attract enough Democratic support, House leaders last week added a sweetener: the first increase in the federal minimum wage in nine years, plus an extension of several popular tax breaks for businesses. The House passed the complex measure -- dubbed "the trifecta" because of its three main facets -- and sent it to the Senate, which planned to vote before adjourning this weekend for the August break.

Frist agreed to the deal, hoping that several Democrats could not resist a chance to raise the minimum wage, in three phases, to $7.25 an hour from the current $5.15. The bill would also have exempted from taxation all estates worth as much as $5 million -- or $10 million for a married couple -- and applied a 15 percent tax rate to inheritances above that threshold and up to $25 million. The value of estates exceeding $25 million would have been taxed at 30 percent.

Most congressional Democrats support raising the minimum wage and oppose cutting the estate tax. Most Republicans take the opposite view, although some from both parties support both proposals. Democrats said they will keep pushing to raise the minimum wage with no strings attached.

GOP senators had practically dared Democrats to vote against the package with the minimum-wage increase. All but four Senate Democrats took the dare, heeding Reid's plea to deny Frist a victory as lawmakers go home to campaign. Republicans predicted that Democrats will regret their decision.

"I certainly wouldn't want to vote against this bill" and then face the voters, Sen. John E. Sununu (R-N.H.) said in an interview. Polls show overwhelming public support for raising the minimum wage and for eliminating "the death tax," he said. Voting against the package, he said, "is bad for the country, and bad politics, too."

Sen. Mitch McConnell (R-Ky.) said all three elements of the bill could have survived simple-majority votes had they been allowed, and he accused the Democrats of being obstructionists. "How can we have bipartisanship in the Congress if Democrats won't take 'yes' for an answer?" he asked.

But Democrats expressed confidence that voters will see the package as a cynical effort to help wealthy GOP supporters by making the estate tax cut the price for a wage increase that the nation's lowest-paid workers deserve.

Rejecting the measure will be easy to explain "when you have all of labor saying they don't like it," said Sen. Robert Menendez (D-N.J.), who is campaigning to keep his seat in November. "It comes down to taking care of a lot of wealthy people" whose estate tax reductions would have prompted reductions in social spending, he said. By one estimate, the plan would have lowered federal tax revenue by $268 billion over 10 years.

Gerald W. McEntee, president of the American Federation of State, County and Municipal Employees (AFSCME), said, "This was a transparent attempt to dangle a minimum-wage increase for families struggling to make ends meet to secure yet another Texas-size tax handout for the wealthiest."

For days, debate on the wage-and-tax bill played out in news conferences and closed meetings while Senate floor action focused on a military spending measure. Much talk centered on the impact that the minimum-wage proposal would have had on people in seven states who work mostly for tips.

In 43 states, workers who receive tips can be paid as little as $2.13 an hour, provided that their tips bring them to at least the minimum-wage level. But seven states, mostly in the West, allow no such exemption. California, for instance, requires a minimum wage of $6.75 an hour for all workers, including bartenders and waitresses.

Senators differed on whether the legislation would force the seven states to drop their protection of tip-earners, and memos offered by various state and federal agencies did not resolve the question. Democratic leaders insisted that the seven states' laws would be overridden.

"Under the Republican bill, Paris Hilton and her family will get $250 million, while the tipped workers in Hilton hotels will lose up to $5.50 an hour," said Sen. Edward M. Kennedy (D-Mass.).

The seven states include Washington, whose Democratic senators -- Maria Cantwell and Patty Murray -- were among those Frist had hoped to win to his side. But they cited the tips issue in announcing their opposition to the bill.

After the vote, Frist said senators had lost "the chance to bring three very important issues to the floor for debate: permanent death-tax relief, extension of expiring tax provisions and a minimum-wage increase of more than 40 percent." He called the matters "vital to the economic security of everyday Americans."

Sen. Mark Pryor (D-Ark.), whom Frist's allies had wooed without success, said he wants to raise the minimum wage, but not if it means such a deep cut in the estate tax.

"I cannot ignore our $300 billion deficit, and the ongoing costs to support the wars in Iraq and Afghanistan and reconstruction in the Gulf Coast," Pryor said in a statement. He said that he would back a more modest reduction that "would cover virtually every small-business owner and farmer in Arkansas."

Staff writer Amy Goldstein contributed to this report.

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