By  on February 2, 2007

WASHINGTON — The Senate passed the first minimum wage increase in a decade Thursday, but prospects for a compromise with the House were uncertain because of differences over tying a boost to tax breaks for small businesses.

Senators debated the bill, which was approved 94 to 3, for almost two weeks. Pas­sage sets the stage for a potential conflict with the House, which OK’d the measure without tax breaks.

House Democratic leaders have insisted that the Senate tax initiative, which sponsors said was needed to get Republican support, be removed from a final version of the bill.

The legislation would raise the minimum wage rate to $7.25 from $5.15 over two years and provide $8.3 billion in tax assistance to small businesses.

The task of resolving the dispute will be left with Senate Majority Leader Harry Reid (D., Nev.) and House Speaker Nancy Pelosi (D., Calif.), marking the first major test of the new Democratic majority in Cong­ress. Pelosi and Ways and Means Chairman Charles Rangel (D., N.Y.) said they would oppose the Senate bill if it contained the tax breaks, an indication that the measure may be heading for trouble if it moves to a House-Senate conference committee.

“Obviously, her preference would be for [the Senate] to pass a clean minimum wage bill in order to ensure that millions of hard-working Americans that are being paid the minimum wage get a long-overdue raise,” a Pelosi spokesman said. “The Senate package is problematic because of its size and its scope, and we would hope that moving forward with any conversations on a tax package would happen in a way that doesn’t hold up the minimum wage increase.”

Pelosi is prepared to start talking with Reid and other Senate leaders about “where we have common ground and can move forward on getting the minimum wage increase passed,” the spokesman said, adding, “I think she would agree with Chairman Rangel in saying that keeping these two matters [the wage increase and tax breaks] separate in separate bills is the most efficient way to handle these proposals.”

Reid told reporters Thursday that he believed the Senate could pass a “stripped-down” version of the bill, meaning with fewer tax breaks, after the differences were reconciled in a conference committee.Senate Democrats argued they needed the multibillion-dollar tax incentives package to push the measure past the 60-vote threshold needed to cut off any attempt to filibuster. President Bush has made his support of a minimum wage hike conditional on tax breaks for small businesses, but has stopped short of a veto threat.

The National Retail Federa­tion, which originally opposed a straight wage increase, has said it would support the bill if it included the tax incentives.

“What it comes down to is how quickly Democrats want to get the bill to the President’s desk,” said Steve Pfister, senior vice president of government relations for the NRF. “It has become crystal clear that, unless the tax provisions are attached, it is not going to get out of the Senate.”

Pfister said he expected Reid to hold the Senate bill “at the desk” and “let things cool down” before he made his next move. But he thought the bill would not pass in the Senate if Democratic leaders tried to strip out the tax breaks and create two separate pieces of legislation.

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