Democrats Say No Way: The Minority Blocks a Majority Tax Effort

How does our system work? How can a minority overrule a majority? How can well-supported bills fail? Why is it important to know the details?

On the night of August 3, 2006, a surprise in the Senate answered all of these questions, showing the many ways our lawmaking body functions.

How did it start?

Republican leadership decided to join two controversial bills - a reduction in the estate tax and an increase in the minimum wage - with hopes of passing the former because the Democrats support the latter. The measure passed in the House, where all tax-related legislation begins.

When the bill moved to the Senate, Senate Majority Leader Bill Frist (R-Tennessee) didn’t expect that Democrats would band together (with a few Republicans joining them) to block the measure.

Democrats are steadfast supporters of a minimum wage increase, so it was unexpected for them to vote against it. So why did they? First, let’s take a look at the minimum wage debate.

The minimum wage

A higher minimum wage is an integral part of the Democrats platform, and some Republicans support it too.

The federal minimum wage is $5.15 an hour, which amounts to $10,712 a year for full time work.

That’s $900 above the poverty line for a single person, while a worker with two children falls $5,900 below that line.

According to the Bureau of Labor Statistics, 479,000 workers were reported as earning exactly $5.15 in 2005. Another 1.4 million were reported as earning wages below the minimum. Together, these 1.9 million workers with wages at or below the minimum made up 2.5 percent of all hourly-paid workers.

Opponents of raising the wage argue that most minimum wage earners aren’t supporting families on their own. Supporters argue that families are still affected -- 47 percent of earners in 2005 were married or had children.

Yet, minimum wage workers tend to be young, many still living with their parents. About half of workers earning $5.15 or less were under age 25, and about one-fourth of workers earning at or below the minimum wage were age 16-19.

The minimum wage has not increased since September 1997. Proponents of a higher wage point out that since it is not tied to inflation, it is worth less and less each year. The minimum wage is worth less today than at any time since 1955.

Democrats vote against their platform

So if the minimum wage is an important part of the Democrats philosophy, why did they vote against it?

Democrats are opposed to reducing the tax paid on inheritance by those who inherit more than $1 million or, the estate tax.

Without new legislation, the estate tax will decrease each year until 2010, when it disappears completely for one fiscal year. The next year, the estate tax will reappear in its original form, in which a $1 million inheritance can be taxed up to 46 percent.

Republicans don’t want to see that happen; the Bush administration says that reducing taxes on this sort of capital will encourage investment and that greater investment will benefit workers - the trickle-down effect.

The estate tax proposal would increase the exemption in 2010 to $5 million per person and $10 million per couple. Estates worth upwards of $25 million would be taxed at 30 percent, so Democrats argue that cutting back or repealing the estate tax would benefit only the very wealthy. Further, they argue, the tax cut would reduce tax revenue or cost the government approximately $268 billion over ten years.

Not willing

The Democrats were not willing to give the estate tax to get the minimum wage. This may be because the minimum wage raise was smaller than most advocates would like. The deal would have increased the wage to $7.25 by 2009, which replaces the amount by which inflation has eroded it over the past few decades, but Democrats say the bill does little to increase the spending power of minimum wage workers.

Thirty-eight Democrats voted to block the bill, while four - Robert Byrd of West Virginia, Ben Nelson of Nebraska, Bill Nelson of Florida, and Blanche Lincoln of Arkansas - supported the bill by voting to limit debate or, invoke cloture. On the Republican side, 56 Senators approved the legislation, but Lincoln Chafee of Rhode Island and George Voinovich of Ohio joined Democrats. Independent Senator Jim Jeffords of Vermont voted to block the bill.

Interestingly, the architect of the plan, Senator Frist, ended up voting with Democrats so that he could reserve his right to ask for another vote in the future. The final vote was 56-42.

The bill illustrates several congressional strategies and functions: the attempt to pass a bill by connecting it with legislation that the opposition supports, the minority banding together to block a measure, and the pressure of an election year. Since midterm elections are in November 2006, you can be sure that you’ll hear about this bill in the campaigns.

What do you think?

Do you support a reduction in the estate tax? A raise in the minimum wage? If you support one and oppose the other, what would you be willing to give up? What kind of compromises would you be willing to make?

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Article Posted on: 8/6/2006