Senate Finance Committee Chairman Ron Wyden (D-Ore.) on Friday announced Democrats’ “Plan B” to raise the minimum wage after the Senate parliamentarian ruled that an earlier proposal from House Democrats to raise the federal minimum wage $15 an hour did not meet special budgetary rules.
Wyden is proposing a workaround solution that would impose a 5 percent tax penalty on large corporations if any of their workers earn less than a certain amount, with the penalty increasing over time.
The language would ensure that large companies would have a significant financial incentive to raise wages, even if they are not mandated by law to pay employees more than the current federal minimum wage of $7.25 an hour.
“As chair of the Finance Committee, I’ve been working on a ‘plan B’ that would make big companies pay for mistreating their workers. My plan would impose a 5 percent penalty on a big corporations’ total payroll if any workers earn less than a certain amount. That penalty would increase over time,” Wyden said in a statement.
A senior Democratic aide said Friday that Senate Majority Leader Charles Schumer (D-N.Y.) is looking at adding such a provision to the $1.9 trillion COVID-19 relief package. He is expected to bring the legislation to the floor as soon as next week.
Wyden said his plan would include safeguards to prevent companies from evading the penalty by outsourcing jobs.
“For example, if a profitable mega corporation like Walmart fires a store’s security guard and replaces him with a contractor who makes far less, my proposal would still require that Walmart pays a penalty,” Wyden said.
Wyden wants to incentivize what he calls “the smallest of small businesses” to raise workers’ wages by providing an income tax credit equal to 25 percent of wages — up to $10,000 per year per employer — to businesses that boost wages.
Senate Parliamentarian Elizabeth MacDonough dealt a serious setback to Democrats this week by advising a proposal under the jurisdiction of the Senate Health, Education, Labor and Pensions Committee to raise the minimum wage was primarily a policy change with only incidental budgetary effect.
As a result, President Biden’s proposal to raise the minimum wage to $15 an hour cannot be passed through the Senate with a simple-majority vote.
The Senate’s Byrd Rule requires that proposals included in budget reconciliation packages — which are allowed to pass with simple-majority votes — produce changes in spending outlays or revenues that are not merely incidental to their policy impacts.
By structuring incentives on large corporations and small businesses to boost wages as tax penalties and tax benefits, Wyden feels confident the parliamentarian will agree those reforms meet the Byrd Rule and can avoid a Republican filibuster.
“While conversations are continuing, I believe this ‘plan B’ provides us a path to move forward and get this done through the reconciliation process,” Wyden said.
“Workers have not gotten a federal pay raise in more than a decade. We can’t continue to have millions of worker — workers who are disproportionately, people of color, women and essential workers like fast food workers and home health aides — earning starvation wages,” he added.
If Democrats aren’t able to find a way to fit the minimum wage increase into the $1.9 trillion COVID-19 relief package they plan to pass under special budget rules, they will need to reach a compromise with at least 10 Republicans to reach the 60-vote threshold to overcome a filibuster.
Sens. Mitt Romney (R-Utah) and Tom Cotton (R-Ark.) this week introduced a proposal to raise the minimum wage to $10 an hour in 2025 and tie the wage increase to crack down on employers who hire undocumented immigrants, demonstrating the wide gulf between where Democrats and many Republicans are on the issue.