Minimum Wage Rises to $6.55 an hour
7/24/2008
Washington, D.C.
News
Column: Minimum Wage Rises to $6.55 an hour by Congressman Silvestre Reyes
On July 24th, the federal minimum wage rose from $5.85 to $6.55 an hour. This increase is the result of legislation advanced by the new Democratic-led Congress in May 2007, and represents the second step of a three-step increase. The minimum wage will rise again on July 24, 2009 to $7.25.
With gas prices at record highs, American families are struggling to make ends meet. Consumer costs -from gas prices to food and health care costs- have all skyrocketed at the same time that American families have seen their real income drop by almost $1,000 since 2001. It is wrong for millions of Americans to be working full-time and year-round and still be living in poverty.
In the current economic environment, it is impossible to survive on $5.15 an hour. This increase is long overdue, and many El Paso families will see an immediate benefit from this increase. The increase to $7.25 an hour will mean an additional $4,400 per year for a minimum wage worker’s family - helping them to keep pace with rising costs. Raising the minimum wage is a key step in working to strengthen the economy for all Americans, not just for the privileged few.
Texas is one of the 25 states that do not have a minimum wage that is higher than the required federal minimum. Over 12.4 million workers across the country will ultimately benefit from this legislation, including an estimated 1.7 million Texans.
For ten years, under the Republican-led Congress, the minimum wage was frozen at $5.15 an hour. This represents the longest period in the history of the minimum wage law that minimum wage workers failed to get an increase. As a result, minimum wage workers fell further and further behind.
Congress also enacted legislation that helps small businesses adjust to the new minimum wage standards. The Small Business and Work Opportunity Tax Act of 2007, signed into law in May 2007, provides small business with over $4.84 billion in tax credits and expanded tax deductions.
The law extended the "expensing" tax benefit for small businesses to invest in machines and equipment by increasing the expensing allowance through 2011 and also increased the allowance to $125,000 and the phase-out threshold to $500,000. The work opportunity tax credit (WOTC) also permits small business owners to claim a tax credit equal to a specified percentage paid in first-year wages to members of certain targeted groups, including families receiving Temporary Assistance for Needy Families (TANF) support, qualified veterans, high-risk youth, and others.
The small business legislation also modified the tax credit small business owners can claim against social security (FICA) taxes paid for employees who receive tips. The modification was designed to keep the new, higher minimum wage from having the effect of reducing the credit. Under both the act and prior law, the credit is equal to the employer's FICA tax on tips in excess of those meeting the minimum wage requirement. Absent other changes, an increase in the minimum wage reduces the tax credit, by increasing the threshold over which the tax credit is earned.
I have heard from many workers and small business owners alike in our community about what the increase means for them. We can not forget that our small business community is the backbone of our regional economy, which is growing and has been strengthened by the investment due to the expansion of Fort Bliss. That is why it was critical that Congress address the potential impact on our small business community.
I believe our business community will find that that the combination of providing the wage increase and utilizing the tax credits will help them keep their best employees, attract new employees, and overall will make them more competitive.
The Democrat-led Congress is helping millions of Americans cope with rising costs, while also providing small businesses with assistance to adjust to the new minimum wage standard. This legislation is a major step to put our economy back on track.
Vincent M. Perez
202-225-4831
vincent.perez@mail.house.gov
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