Source: THE NEW REPUBLIC, Date: October 28, 1996, Title: “Bare Minimum: Goodies for the Rich Hidden in Wage Bill,”* Author: John Judis, (Reprinted in Santa Rosa Press Democrat, October 13, 1996)
On August 20,1996, President Clinton signed into law the Small Business Job Protection Act of 1996, ostensibly geared to aid small business owners and their employees. The publicized intent of the bill was to raise the minimum wage from $4.25 to $5.15 an hour. However, according to John Judis, senior editor of The New Republic, the minimum wage bill included at least ten other significant provisions aimed at neither small business owners nor their employees. Indeed, Judis charges, these unpublicized provisions may negate whatever good the bill may do.
Among the lowlights:
o The bill reinstates tax incentives which encourage leveraged buyouts (LBOs): In a moment of temporary sanity, Congress put into the 1986 tax reform bill a measure preventing firms that engage in LBOs from claiming a tax deduction for the exorbitant fees they pay investment banks and advisors. However, this year’s minimum wage bill once again makes these fees deductible and does so retroactively, creating a billion-dollar boon for companies that contested the 1986 ruling.
And in the case of employee LBOs, generally thought to be favorable, Congress slipped into the minimum wage bill a provision that would eliminate a special incentive that allowed banks to exclude half of the interest payments they received on loans for employee buyouts, discouraging employee LBOs of otherwise doomed companies.
o Incentives for multinational corporations: The new minimum wage bill has successfully protected American multinationals from paying taxes on unrepatriated foreign income, a long-standing tax loophole for overseas corporations. In Clinton’s 1992 Presidential campaign, he vowed to do away with these tax incentives; however, in 1993 his Administration backed down, merely requiring overseas firms to reinvest their unrepatriated profits in foreign plants and equipment rather than banking them. Under the new minimum wage bill, however, this year’s Congress rescinded even that.
o Weakened retirement and pension protection: The bill does away with a requirement that companies must offer the same benefits to lower wage employees as they do to higher wage employees, and effectively reverses the Employee Retirement Income Security Act of 1974 (ERISA), which states that if an insurance company takes too much in fees or invests in risky ventures they can be sued.
Additionally, the bill does away with a surtax on luxury car purchases and diesel fuel for yachts, ends a surtax on one-year pension withdrawals over $150,000 (a boon for the ultra-rich), and allows newspaper publishers to treat their distributors and carriers as independent contractors rather than employees in order to avoid paying their Social Security and unemployment compensation.
SSU Censored Researchers: Brooke Hale, Mark Lowenthal
COMMENTS: John B. Judis, author of the New Republic article, says, “I wrote the article because the coverage of the subject had been extremely superficial. The only general publication to deal at all with the fine print was Business Week.
“If the public had a better idea what was in the bill Congress passed, they’d be even less enthusiastic about the institution. I’ve had members of Congress tell me they didn’t know what was in it, and were shocked by my article,” says Judis.
Judis believes the limited media coverage of the hidden perks of the minimum wage bill serves the interests of “all the various lobbyists, and the politicians that they cajole into doing their business.”