The Vote To Raise the Minimum Wage without Cutting Estate Taxes would eliminate increased estate tax exemptions from H.R.5970, while maintaining the minimum wage increases and other provisions included in the bill.
The estate tax provisions that would have been eliminated by this vote increase exemptions from the gift and estate taxes to $5 million in 2015. This amount is indexed for inflation. The estate tax is a tax on the transfer of assets to a person’s heirs and the gift tax is a tax on the transfer of valuable gifts. The Act decreases the maximum estate tax rate to 30% in 2015. The estate tax is scheduled to expire in 2010, but return in 2011 with a $1 million exemption and a maximum tax rate of 60%.
The legislation increases the federal minimum wage from $5.15 an hour to $5.85 an hour in 2007, $6.55 an hour in 2008, and $7.25 an hour in 2009. The bill preempts certain state laws that increase the wages received by tipped employees.
Among other tax changes, the legislation extends tax deductions for tuition and related expenses, for state and local sales taxes, and for certain expenses of elementary and secondary school teachers. Provisions regarding mining are also included in the legislation.
The Middle-Class Position:
The Middle-Class Supports. At less than $11,000 a year for a full-time worker, the federal minimum wage is a poverty wage. It is a rate at which it is impossible for working Americans to independently pay their rent, feed their families or get needed medical care—much less save for the types of investments that make it possible to work one’s way into the middle class, like an education, a secure home or the chance to start a business.
Contrary to the stereotype of the minimum wage worker as a teenager with nothing to purchase but junk food and movie tickets, the typical minimum wage worker is an adult providing more than half of his or her family’s total earnings. According to the Economic Policy Institute, half of families with a minimum wage worker rely on his or her pay as the family’s only source of earnings. As many states have raised their minimum wages above the federal rate, economists have also had more opportunities to study the effects of minimum wage increases, concluding that raising the minimum wage does not lead to the loss of jobs.
In contrast, the estate tax provisions which this vote aimed to remove from the bill will only benefit the wealthiest taxpayers. The estate tax is the most progressive component of the federal tax code and applies only to Americans lucky enough to inherit substantial fortunes. By taxing inherited wealth, the tax preserves the American tradition of rewarding hard work, not inherited privilege and wealth. According to the nonpartisan Congressional Budget Office, the estate tax provisions would cost approximately $267.6 billion between 2007 and 2016. This significant reduction would adversely affect aspiring middle-class and middle-class Americans by burdening them with more of the cost of public services while allowing accumulated wealth to be passed on for generations. Those who work for their money would be forced either to pick up a bigger share of the tax bill or to suffer cuts in services essential to middle-class families and communities.
Roll Call Vote 424 would strip the provisions that are detrimental to middle-class households from the legislation, while preserving the minimum wage increases that are critical to expanding the ranks of the middle class.
From the Experts:
“The [minimum wage and estate tax] proposals should not be linked…Since 1997 Congress already has been quite generous to the relatively modest number of wealthy estates subject to taxation. High-income households, moreover, seem to be faring reasonably well during this recovery while low-income households are not. Recent Census data reveal, for example, that the average real income of the top five percent of households rose 3.1 percent last year, while that of the bottom fifth of households was up only 0.6 percent.” – Jared Bernstein, Director of the Living Standards Program at the Economic Policy Institute, and Isaac Shapiro, Associate Director at the Center for Budget and Policy Priorities, August 31, 2006
“It’s shameful to tie a long-overdue but modest wage increase for low-wage workers to a massive, permanent tax break for a handful of multi-millionaires. The tax breaks for the wealthy will shrink federal revenues, force deeper cuts in services for low-income women and their families, and exacerbate the growing gap in income and wealth between the very, very rich and everyone else.” – Nancy Duff Campbell, Co-President, National Women’s Law Center, August 1, 2006
Beyond this Bill:
As one out of three U.S. states has already taken the initiative to exceed the federal minimum wage and the economic evidence continues to mount that increased minimums boost the nation’s lowest paid workers without causing a loss of jobs, it’s long past time for the federal government to catch up. Legislators who want to improve opportunities for the nation’s poor and near poor to work their way into the middle class should act immediately to raise the minimum wage. At the same time, federal legislation should never – as this law does – undermine state legislation that improves the earnings of tipped workers who already must deal with unstable income.
Indeed, stabilization of the estate tax exemption and rate are only fair to those who must pay the tax; however, legislation should fix the exemption and the tax rate at levels that maintain the tax’s important revenue stream. The estate tax is an important contribution by the wealthy who have benefited most from the favorable social and economic conditions maintained by public policy.
Search our analyses of legislation
significant to America’s current and
aspiring middle class, and find out
how members of Congress voted on
those bills.
