Stennis Institute of Government

During its first 100 hours, the Democratic majority in the United States House of Representatives passed legislation that would increase the federal minimum wage for the first time in a decade. The legislation would increase the minimum wage from the current $5.15 to $7.25 an hour over the course of two years.

The word on the Hill is that this measure will pass the Senate in conjunction with tax breaks for small business — necessary to achieve majority support in the Senate.  The Chair of the Senate Finance Committee, Senator Max Baucus (Montana), noted that small business tax packages have been coupled with minimum wage increase in the past.  If the anticipated happens, it is projected that President Bush will sign the legislation.  A White House spokesperson indicated that any increase in the minimum wage should be tied to tax relief to help small business stay competitive.

The first federal minimum wage law was enacted in 1938.  This wage was 25 cents an hour, adopted as a part of FDR’s New Deal. The last increase — establishing the $5.15 rate — has been in effect since 1997.  The period between 1997 and 2007 represents the longest period since 1938 that the minimum wage has remained static.  The House version of the legislation would raise the minimum wage to $5.85 within two months after passage, with a second hike to $6.55 a year later and a final hike to $7.25 after a second year. Thirty states already have a minimum wage which is higher than the current federal rate.  Washington and Oregon have adopted the highest state minimum wages, at $7.93 and $7.80 respectively.

Local entities will be interested in tracking the federal moratorium on the ability of localities to tax internet access, which is set to expire November 1, 2007.  The Internet Tax Freedom Act was signed into law October 21, 1998.  The Act bans the taxing of internet access and  “internet-only” taxes such as bit taxes, bandwidth taxes and email taxes.  The measure further  prohibits governments from taxing items sold online.

Since its original enactment, it has been twice extended by Congress.  The early interest in this issue in the 2007 session bodes well for an extension. Moreover, at least one piece of proposed legislation would place a permanent ban on state taxes on internet access.  This legislation is sponsored by Senators Wyden (Oregon), McCain (Arizona) and Sununu (New Hampshire).  Wyden co-authored the original legislation passed in 1998 and also co-authored its most recent extension. Proponents of the legislation seek a means of ensuring more affordable broadband access, while opponents see a potentially vital local tax base being eroded by federal measures. President Bush supports the measure, which has a bipartisan base.

Thinking on internet service…Senator Stevens (Alaska) has proposed a measure, the Universal Service for Americans Act, which would require all communications services to pay into a fund which would subsidize service in rural areas, schools and libraries.  The passage of this measure could result in user fees for broadband subscribers. The user fee measure could result in significant advantages in rural areas of Mississippi,  the South, mid-West and Alaska.

Thanks for reading.  Have a good day.