Senate Passes War Supplemental Bill With Minimum Wage Increase and Tax Relief Package

Following the House lead, the Senate on March 29, 2007, approved, by a vote of 51 to 47, a supplemental war funding bill that also includes an increase in the minimum wage and $12 billion in tax incentives and revenue-raising offsets. The $12 billion in small business tax incentives represents an increase over the $8.3 billion in small business incentives that had previously passed the Senate in earlier minimum wage legislation. New tax provisions added in the Senate bill include extension of depreciation provisions for new equipment, expansion of the Work Opportunity Tax Credit to rural counties in economic decline, further expansion of the kiddie tax, and additional Hurricane Katrina related tax relief. Offsetting revenue raisers revise a provision prohibiting the IRS to impose certain interest and penalties if it has failed to give timely notice by extending the notice period and address the tax gap in a variety of provisions imposing or expanding penalties and requiring e-filing by certain large businesses. Half a dozen IRS administration and enforcement provisions were also included.

A conference agreement will be necessary to resolve differences between the House and Senate versions of the legislation. The Administration has threatened to veto the war supplemental legislation due to troop pullout requirements, unrelated to the minimum wage/small business issues, but also criticized the inclusion of provisions that were not germane to the war effort.