Senate readies wage bill, with business tax break

WASHINGTON - The Senate cleared the way yesterday for an increase in the minimum wage, but only with business tax breaks that House Democrats want removed.

Final Senate passage of the legislation is expected later this week, setting the stage for difficult negotiations between House and Senate Democrats over how to get the bill to President Bush for his signature.

In a key test yesterday, the Senate voted 87-10 to end debate on the bill, well clear of the 60 votes needed.

Earlier this month, the House passed the same increase in the minimum wage - from $5.15 to $7.25 an hour over two years - without any tax provisions. Senate Democrats tried to push through the House version last week but failed to get the 60 votes to end debate.

Yesterday's vote emphasized how Senate passage of a wage increase depends on the tax package to attract Republican votes. The White House has also signaled that Bush wants tax breaks in the legislation.

"Raising the minimum wage will cost some jobs," Al Hubbard, director of the president's National Economic Council, said aboard Air Force One. "We think it's important to counter that with tax breaks that will replace those jobs."

The tax breaks in the Senate bill have divided the private sector, pitting small firms and retailers that would benefit from them against larger corporations and manufacturers that would have to pay for them. The package costs $8.3 billion in lost tax revenue over 10 years.

To help pay for the tax breaks, corporations would no longer be able to deduct the cost of jury verdicts or settlements in liability suits against them, and their executives' tax-deferred pay packages would be capped at $1 million a year.