‘Plan B’ for minimum wage is pitched as Senate prepares to vote on aid package

March 2, 2021

Senate Finance Committee Chairman Ron Wyden said on February 26 that he would draft a “Plan B” to boost the federal minimum wage through the tax code since language intended to do the same that was included in a pandemic relief package has been given a thumbs-down by the nonpartisan Senate parliamentarian.

According to a report by Roll Call, the Oregon Democrat issued a statement saying his proposal would impose a 5% penalty on the payroll of “big corporations” if any of their workers “earn less than a certain amount.” The penalty would increase over time and also apply in cases where companies replace those workers with contractors, he said.

For small businesses, Wyden said he would offer an income tax credit equal to 25% of wages—up to $10,000 per employee—if those businesses “pay their workers higher wages.”  Details of the proposal were not immediately available.

The move came in response to guidance from the Senate parliamentarian Thursday evening, February 25, that a proposal to raise the hourly federal minimum wage from $7.25 to $15 by 2025 would violate rules under the budget reconciliation process, which Democrats are using to avoid a Republican filibuster.  The so-called Byrd Rule prohibits including measures in a reconciliation bill if their budgetary impact is “merely incidental” to their underlying policy objective.

Wyden said he was offering an alternative plan to raise wages through the tax code in an effort to avoid a procedural objection. “We couldn’t get in the front door or the back door, so we will try to go through the window,” he said in his statement.

President Joe Biden had proposed the minimum wage boost as part of his $1.9 trillion pandemic relief package. But he said earlier this month he did not expect the wage measure to survive in the package under Senate rules.

“While conversations are continuing, I believe this ‘Plan ‘” provides us a path to move forward and get this done through the reconciliation process,” Wyden said. “We can’t continue to have millions of workers—workers who are disproportionately people of color, women and essential workers like fast food workers and home health aides — earning starvation wages.”

According to Roll Call, the Retail Industry Leaders Association—which represents big-box store chains like Best Buy, Target,  and Home Depot, quickly denounced Wyden’s proposal as an assault on business.

“Threatening businesses with a whopping payroll tax increase … should be a non-starter for anyone who cares about economic recovery and getting furloughed workers back on private sector payrolls,” said Austen Jensen, the trade group’s SVP for Government Affairs. “This shouldn’t be brought up under a 50-vote scenario or a 60-vote scenario; it’s a terrible idea.”

The House, which passed the aid package  on Friday, has included the minimum wage provision despite the adverse ruling from the Senate’s parliamentarian. However, RollCall points out, the wage measure will have to be stripped out when the bill reaches the Senate unless Democrats decide to overrule the parliamentarian. The White House issued a statement Thursday night saying Biden would respect the parliamentarian’s guidance.

Research contact: @rollcall