- The Washington Times - Saturday, July 29, 2006

The House last night approved a pension-overhaul bill and headed toward an early morning vote on a package that includes popular tax breaks coupled with contentious provisions to ease the estate tax and increase the minimum wage.

“These reforms … represent the most sweeping changes to American’s pensions system in 30 years,” Rep. John A. Boehner, Ohio Republican, said of the pensions bill, which aims to strengthen traditional employer-based pension plans that cover about 44 million Americans. It passed 279-131.

Republican leaders in the House decided to craft the second bill containing the minimum-wage increase demanded by many liberal Republicans, but coupled with the tax breaks and estate tax relief highly prized by conservatives.

That bill’s chances in the Senate are not clear because the chamber has rejected estate tax relief in the past. But House leaders said the combination is the best chance to get estate tax relief.

“This is the best shot we’ve got; we’re going to take it,” Mr. Boehner said.

Democrats ripped the estate tax portion, saying it’s a giveaway to the wealthy, and complained that coupling it with a popular minimum-wage increase is a cheap election-year trick to protect vulnerable Republican members, while ensuring that the wage increase won’t actually become law.

“This is nothing more than a cynical, political ploy to defeat a minimum-wage increase because this bill will go nowhere in the Senate,” read a letter from House Democratic leaders to their members, urging them to oppose the bill.

Still, it puts Democrats in the uncomfortable position of having to choose to vote against one of their signature issues.

Rep. Jeb Hensarling, Texas Republican, said easing the so-called death tax is very important to conservatives like himself, but that raising the minimum wage kills jobs.

“They gave us something we love and something we hate,” he said, predicting a close vote. “It’s a tough call.”

The House-passed pensions bill, among other things, would force employers that have fallen behind in their defined-benefit pension plan payments to catch up within seven years, and close loopholes that have allowed companies to underfund their plans. It also encourages alternatives such as 401(k) plans, through things like automatic enrollment, and gives airlines that have frozen their pension plans, Northwest Airlines Corp. and Delta Air Lines, an additional 10 years to meet pension obligations.

The Senate will consider the two bills next week, and Senate Majority Leader Bill Frist, Tennessee Republican, is on board with the House’s two-bill plan.

“He is looking forward to bringing to the floor two bills that will strengthen pension funding rules, help to bring sanity to the tax code and offer a first step toward full repeal of the unfair death tax,” Frist spokeswoman Carolyn Weyforth said.

But Senate Minority Leader Harry Reid, Nevada Democrat, vowed to kill the minimum-wage tax cut bill — and its $310 billion price tag — if it gets to the Senate.

“The Senate has rejected fiscally irresponsible estate tax giveaways before and will reject them again,” he said.

The measure would increase the minimum wage from $5.15 to $7.25 per hour, over the next three years. And it would ease what many call the death tax that’s levied on estates. It would exempt $5 million of an individual’s estate, and $10 million of a couple’s, from estate taxes by 2015. Estates worth up to $25 million would be taxed at capital gains rates, currently 15 percent and set to increase to 20 percent. Estates larger than $25 million would see their tax rate fall to 30 percent by 2015.

The bill also contains $38 billion in other popular tax cuts, such as a research and development tax cut for businesses, a tax deduction for college tuition and a deduction for teachers who buy class supplies.

Sen. Charles E. Grassley, Iowa Republican, wanted to include those tax cuts in a larger pensions conference report that was being negotiated between the House and Senate, but House members refused and talks fell apart Thursday night. House leaders then decided to vote on a pensions bill that didn’t include Mr. Grassley’s demand. The senator circulated a letter yesterday urging negotiators to sign the original conference report.

This article is based in part on wire service reports.

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