WASHINGTON — Amid divisions among Democrats in Congress, the Senate is to begin debate today on legislation that would increase the minimum wage for the first time in a decade.

The House, where Democrats hold a 32-seat majority, has passed the bill raising the rate to $7.25 from $5.15 over two years without tax breaks for small businesses. However, Senate Democrats, who hold just a 51-49 majority, are expected to attach a multibillion-dollar tax incentive package to the bill in order to garner enough support from Republicans to push the measure past the 60-vote threshold needed to cut off any attempt to filibuster.

A spokesman for Senate Majority Leader Harry Reid (D., Nev.) said Friday the tax breaks will be offered as an amendment and that differences between the Senate and House will be “worked out in conference.” Sen. Max Baucus (D., Mont.), chairman of the Senate Finance Committee, has been more emphatic, saying flatly that Democrats do not have enough votes to overcome a filibuster without offering the tax breaks.

However, Rep. Charles Rangel (D., N.Y.), chairman of the House Ways & Means Committee, has threatened to use a procedural maneuver to reject the Senate bill if it contains the tax breaks. The entire matter could be left in the hands of Reid and House Speaker Nancy Pelosi (D., Calif.) to iron out the differences.

Opponents of the bill argue that it would be an unfair burden without the tax breaks, while supporters see benefits from increased discretionary income for their customers.

Sen. Edward Kennedy (D., Mass.), a longtime champion of an increase who opposes the tax incentives, circulated a statement at a Friday press conference signed by hundreds of small-business supporters, including Eileen Fisher, president and chief executive officer of Eileen Fisher Inc.

“Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity and improving product quality, customer satisfaction and company reputation,” the executives said in the letter.

They also pointed to the 20 states and the District of Columbia that already have minimum wage rates that exceed the existing federal standard.

This story first appeared in the January 22, 2007 issue of WWD. Subscribe Today.

“States that have raised their minimum wage rates above the inadequate $5.15 federal level have had better employment and small business trends than the other states,” the letter stated.

Stefani Greenfield, co-owner of Scoop, which operates 11 contemporary boutiques employing more than 350 people in New York, Florida, Illinois, Nevada, Texas, Connecticut and New Jersey, said she supports a higher minimum wage.

“I think you have to be more concerned about the future of your business and the economy than what you pay people to do a job,” Greenfield said. “If business isn’t good, it doesn’t matter what the minimum wage rate is. Most people live on credit and most people live paycheck to paycheck, so the more money [they earn], the more money they put back into the market.”

She said the increase in the federal standard will not affect her business because all of her employees are already paid above the federal minimum rate.

“My partner and I go home every night and worry about our 350-plus employees as much as we worry about sales,” Greenfield said.

H. Lee Scott, president and chief executive officer of Wal-Mart Stores Inc., the world’s biggest retailer, has said the discount giant supports a minimum wage increase because it would give customers more spending power.

The National Retail Federation originally opposed a straight increase but now has said it would support the bill if it includes tax incentives for smaller retailers.

As for tying the wage hike to tax relief, Kennedy said, “There is no justification or reason to provide additional tax breaks that are just going to increase the deficit, the debt.” But he added, “If … the decision is made by the leadership that a modest program has to be included, we’re certainly going to be open to that.”

President Bush has said he supports an increase, contingent on tax incentives. He has stopped short of saying he would veto the bill without the breaks.

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