[Congressional Record Volume 142, Number 100 (Tuesday, July 9, 1996)]
[Senate]
[Pages S7461-S7466]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SMALL BUSINESS JOB PROTECTION ACT OF 1996
The Senate continued with the consideration of the bill.
Mr. MOYNIHAN. Mr. President, I am happy to yield 8 minutes to my
distinguished friend and fellow member of the Finance Committee,
Senator Graham of Florida.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM. Mr. President, I wish to speak briefly on a provision
which I hope will be included in this bill at the time we take our
final vote. It is a provision which is of great importance to working
parents and their children across America.
For years, one of the major challenges to American families has been
how to plan for their children's educational future. This challenge has
been exacerbated in recent years due to the continued rising costs of
college education.
In response to this challenge, over the past 10 years States have
formed innovative partnerships with families. These are typically known
as prepaid college tuition plans. These plans, although not
structurally identical, share a common purpose. These plans allow
parents to pay in advance for a child's tuition at a participating
college or university, thereby locking in today's tuition prices,
guaranteeing the child's access to a future college education. The
State then takes the funds which have been paid by the participant,
typically the parent, and invests them in a way that keeps pace with
the cost of college education. These programs are designed so that
people of moderate means can help their children realize the dream of a
college education. For instance, the typical Florida family
participating in this program earns approximately $50,000 a year.
These programs are also tailored to maximize flexibility. Families
can either purchase a prepaid tuition contract with a lump sum or, if
they choose, they can pay the child's education in monthly
installments. These plans, therefore, are affordable. For instance,
those families who opt to invest on a monthly basis in my State of
Florida put aside an average of about $53 a month, roughly the price of
cable television service.
This affordability has made prepayment programs enormously successful
in Florida and across the Nation. Most importantly, at a time when the
next generation will struggle to provide for the financial security of
its children, prepaid college programs provide a powerful incentive for
families to save, to invest in their futures, to provide for some
security when an unexpected tragedy occurs.
Let me share with you an example of such an unexpected tragedy. Mr.
and Mrs. Daniel Gilliland enrolled their sons, Sean and Patrick, in the
Florida program in 1988, the first year of its existence. Four years
later, Sean entered the University of Florida as a freshman in the fall
of 1992. In 1994, the father, Daniel Gilliland, died unexpectedly, just
as the younger son Patrick was about to go to the University of Florida
for his freshman year. The death of Daniel Gilliland was devastating to
the family, but because the Gillilands were able to participate in the
Florida prepaid college program both children were able to go on with
their lives and continue their education. I will quote from a letter
from Mrs. Gilliland, which I ask unanimous consent be printed in the
Record immediately after my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. GRAHAM. She states, ``By expecting the unexpected, we were able
to give both sons an education at a fine university that would
certainly otherwise have been difficult for me as a single parent.''
When Daniel died, I silently offered ``thanks that we had the
foresight and chance to participate in this program.''
Today, Sean is a senior at the University of Florida, ready to
graduate with a degree in business. Patrick maintains a 3.6 average,
while working toward a degree in athletic training.
Mr. President, it is because of success stories like the Gilliland's
that the prepaid college programs are flourishing. Twelve States
already have operating programs. Those States are those depicted in
green on this map. Four States depicted in yellow will begin tuition
programs this year, and a dozen more are moving towards enacting
prepaid tuition legislation, those depicted in red.
As an example, the Texas prepaid tuition program, which was set up
this year, receives 4,000 inquiries a day and enrolled 40,000
participants within the first few weeks of implementing the program.
In Florida, 376,000 families are currently participating in the
program; 40,000 participants join each year.
Why, in the face of this great success, are we considering Federal
legislation to affect State prepaid tuition plans? The reason is
because early this year the taxation of these plans was called into
question by the Internal Revenue Service. The IRS contacted six States
with operating programs and informed them that the IRS intended to do
two things: First, the IRS stated that it would treat the State fund as
a taxable corporation rather than a tax-exempt government entity.
Obviously, this action would make it difficult for States to meet their
obligation to families under the plan. Second, the IRS stated that
families should have to pay tax annually on the interest income earned
on amounts transferred to the fund.
Mr. President, it just does not make sense to me that an individual
who purchases a tuition contract should have to pay tax every year on
the earnings on the funds. First, the contributor has surrendered
control of his funds. He or she can only get money back if a student
dies or should not qualify for college. And then, under most plans, the
State refunds only the principal. Second, the contributor does not have
access to the funds to pay the tax, since the money contributed to the
tuition contract now belongs to the fund itself.
Given the fact that most who contribute to the fund are of modest
means, it is a tremendous disincentive to investing in education to
make contributors pay tax on interest income for up to 18 years before
the child goes to college.
Because we felt so strongly about this issue, a bipartisan group of
Senators, including Senators McConnell, Breaux, and Shelby, decided to
do something about it. In discussions with the administration and the
Department of Treasury we were able to get the IRS to revisit this
issue. I am pleased to report that on June 11 of this year, the IRS
issued new rules that will temporarily exempt State tuition plans from
interest income taxation. This matter has not been settled. The
Department of Treasury has asked for help from Congress, asking us to
clarify the tax treatment of these plans. Until we act, the financial
future of these plans, along with the education of over a half-million
participants nationwide, remains in limbo. This bill will clarify that
these State programs are not taxable and that the earnings on the fund
will not be taxed until the child goes to college.
Removing the specter of Federal taxation from these plans is
particularly appropriate at this time, a time when Congress should be
trying to foster innovative programs among the States and encouraging
families' efforts to save and invest for their children's future.
I would like to particularly thank Senator Roth and Senator Moynihan
for their support and assistance in including this important provision
in the legislation. With enactment of this legislation, parents and
children will be able to rest easier, knowing that Congress has done
the right thing in protecting their investment and protecting their--
and our--Nation's future.
Exhibit 1
Mrs. Daniel D. Gilliland,
Bradenton, FL.
Karen S. Fenton,
Editor, College Bound, Florida Prepaid College Program,
Tallahassee, FL.
Dear Ms. Fenton: I am writing to acknowledge your
invitation to share ``success stories''.
My husband Daniel and I enrolled our two sons Sean and
Patrick in the College Program in 1988, I believe the first
year this was offered.
[[Page S7462]]
Sean entered the University of Florida (Honors Program) in
the fall of 1992 a graduate of Manatee High School,
Bradenton, Florida.
Daniel died suddenly two years later at age 52, so with
Sean then a sophomore, and Patrick about to enter his
freshman year also at the University of Florida, I did
silently offer thanks that we had the foresight and chance to
participate in this program.
By expecting the unexpected, we were able to give both
son's an education at a fine university that would certainly
otherwise have been difficult for me as a single parent.
Today, Sean has reached his senior year pursuing a degree
in business, with an area of specialization in Japanese
studies.
Patrick presently in his sophomore year maintains a 3.6
average while working towards a degree in Athletic Training.
Thank you for allowing me to share this brief page from our
lives with you and other participants of this college
program.
Sincerely,
Sally A. Gilliland.
Mr. MOYNIHAN addressed the Chair.
The PRESIDING OFFICER. The Senator from New York is recognized.
Mr. MOYNIHAN. Mr. President, I am sure I can speak for the chairman,
Senator Roth, when I say to Senator Graham of Florida that it is we who
are indebted to him for having brought this matter to the committee,
set forth the issues with clarity and succinctness, and won unanimous
support for obviously an important subject--important not just to
Florida but, as the map shows, to States across the Nation.
I see Senator Conrad has risen. I am happy to yield 8 minutes to him.
The PRESIDING OFFICER. The Senator from New York has 5 minutes
remaining at this time.
Mr. MOYNIHAN. I ask unanimous consent if I might use 3 minutes of the
leader's time for Senator Conrad.
The PRESIDING OFFICER. The Senator may do that.
The Senator from North Dakota is recognized.
Mr. CONRAD. Mr. President, I support the Small Business Job
Protection Act of 1996 and urge my colleagues to join me in supporting
this legislation. The Senate Finance Committee made a series of
bipartisan changes in the bill as it came from the House, led by our
chairman and ranking member, the Senator from New York. I want to
publicly commend them for the outstanding job they did in improving
this legislation. I especially want to single out the ranking member
who has, as always, made enormous contributions to this finished
product. I think this is a significant improvement over what was sent
to the committee.
The bill raises the minimum wage by 90 cents over the next 2 years. I
think everybody who has been following this debate understands that.
The current minimum wage is at a 40-year low in purchasing power. Maybe
I need to repeat that, because I think it is a stunning fact. We are
not talking about a 4-year low, we are talking about a 40-year low in
terms of its purchasing power.
I brought this chart that shows what the minimum wage has been from
1960 to the end of 1995 in purchasing power. As we can see, the minimum
wage has been all over the map over this period of time. Without
exception, it has been higher than it is today. It is time to act. It
is the right thing to do. It is the fair thing to do.
Over the past 2 years, I and many others have supported welfare
reform that encourages adult, able-bodied welfare recipients to work.
However, any welfare to workfare reform, to be effective, must be
accompanied by a living wage for those who do work. I do not know how
anybody can seriously advocate welfare reform as it has been talked
about in this Chamber and fail to support a living wage for those who
do work. That is fair. That is what we ought to do.
The legislation before us also contains numerous provisions to help
small businesses. I come from a State of shopkeepers, farmers, and
small manufacturers. My State has many very small businesses. I was
just telling a colleague that a cousin of mine ran a small gift shop in
my hometown of Bismarck, ND. I know something about that business. I
know that it provided a modest income. I am not going to use those
figures here because back home people would know exactly who I am
talking about and I would be breaking faith with a treasured relative.
But I can tell you, I know what happens to small businesses. I used to
be the tax commissioner of my State.
I have looked at the books and records of literally hundreds of
businesses in my State, and I think I understand very, very clearly the
pressure that an increase in the minimum wage puts on small business
owners. I have evaluated it very carefully, and think I fully
appreciate its effects.
Mr. President, I say to those small business owners in my State who
have been strong supporters of mine, it is time now to increase this
minimum wage. It is the right thing to do. It is the fair thing to do.
I know it is going to mean difficulty for some. I regret that. But I
also know there are literally thousands of people in my State who are
dependent on this minimum wage to provide for their families' incomes.
Today, that family income, for those who are on the minimum wage, is
$8,800 a year. I defy anyone to explain to me how you live on $8,800 a
year, even with a very small family, even if it is a single person--
$8,800 a year.
To offset the effect on small businesses, we have included many
provisions to help small businesses. I am strongly supportive of those
provisions. The key provision increases the amount of investment small
businesses can expense from the current $17,500 per year to $25,000 per
year. That is a tax savings of up to $2,900 a year when it is fully
phased in.
Mr. President, these sound like modest amounts. They are modest
amounts, but when you talk about the very small businesses in my State,
they make a difference. It will be a tremendous help to thousands of
small businesses and farmers in North Dakota.
In addition, the legislation contains a series of provisions
reforming subchapter S corporations. Again, my State has hundreds and
hundreds of subchapter S corporations. My wife, when she was in the
private sector, had a subchapter S corporation. I am very familiar with
the operations of those businesses. These changes are long overdue.
I think the business community is going to welcome a key provision
that increases the number of allowable stockholders from 35 to 75 and
allows S corporations to have subsidiaries.
These and other changes will allow S corporations to grow and invest,
creating jobs and a better future for literally millions of Americans.
For working families, the most important changes in the bill provide
for simplified pension plans for small businesses. Again, not only will
the employees be the beneficiaries, the owners of these businesses will
be the beneficiaries. Anybody who has gone through the paperwork
required of pension plans for small businesses knows what I am talking
about. The rules as currently constituted are a nightmare for small
business owners. These provisions are going to improve that
circumstance dramatically.
Mr. President, I again salute the ranking member of the Finance
Committee, the senior Senator from New York, for the outstanding effort
that was made in the Finance Committee to improve these provisions.
The savings incentive match plan for employees [SIMPLE] reduces
compliance and reporting requirements for small businesses with 100 or
fewer employees. Businesses will be able to offer either IRA's or
401(k) plans.
Mr. President, for families in which one spouse decides to stay at
home to care for children, this bill allows for a full IRA contribution
of up to $2,000. This will remove the penalty that is in the current
code with respect to spouses who are at home.
In this legislation, the Congress recognizes the work of raising
children to be productive members of society is just as important--many
of us believe more important--than paid work. In fact, it is the most
important job of any in our society.
These are dramatic improvements to current law that will allow
millions of Americans to provide for their retirement. In doing so, the
savings generated will help provide for the investment needed for
economic growth and prosperity.
The Senate Finance Committee also provided for the extension of a
number of important tax incentives. Specifically, the targeted jobs tax
credit is extended and renamed the ``work opportunity tax credit.''
This tax credit provides incentives for businesses to hire difficult-
to-place workers.
[[Page S7463]]
Second, the research and experimentation tax credit and the orphan
drug tax credit are extended. These assure that the private sector is
encouraged to develop new technologies and new drugs.
For my State and many others with lignite and low-rank coals, this
legislation extends a tax credit incentive to produce and market
alternative, environmentally friendly energy products. It will help
high-technology energy businesses find investors who are willing to
build multimillion dollar plants using new technologies to bring these
alternative fuels to market.
In closing, I wish to raise two issues. First, these tax benefits
must be paid for. Unfortunately, one of the major sources of the
funding is the extension of the airline ticket tax. This tax made sense
when airline ticket prices were regulated. Under regulation, prices in
small markets served by one or two airlines were basically the same as
prices in large, heavily traveled, highly competitive markets. That is
no longer true. Deregulation brought higher ticket prices to many rural
states and smaller cities. Compounding that inequity, the 10-percent
tax places a larger burden for supporting the Federal Aviation
Administration on small markets.
That is simply unfair. The airline ticket tax needs a major overhaul.
The burden of paying for the FAA should not fall disproportionately on
small markets. While this extension of the ticket tax will undoubtedly
pass because it is attached to a bill that has so many positive
benefits, we need to get about the business of reform before any
additional extensions are made. Rural States like North and South
Dakota, Montana, and Nebraska as well as small cities in every State
will benefit from reform.
We must also begin to develop new approaches to help stabilize the
rural economy. Senator Hatch, Senator Harkin and others have drafted
legislation to encourage the development of farmer-owned food-
processing cooperatives. While the prices of raw commodities fluctuate
wildly from year-to-year depending on the weather, processed-food
prices are far more stable. Farmers need to be able to process some of
their own production for the market in order to stabilize their
incomes. Farmers can do that through farmer-owned cooperatives. I
applaud the efforts of Senators Hatch and Harkin and others. I hope
that their legislation can be added to this bill in conference as a way
to help bring some economic stability to the highly volatile farm
sector.
This small business legislation may be the most important piece of
legislation Congress addresses this year. So far, this legislation has
enjoyed bipartisan support. I recommend its passage without amendments.
That would kill any chance of the legislation becoming law.
The PRESIDING OFFICER. The Senator from Kansas is recognized.
Mrs. KASSEBAUM. Mr. President, I yield 4 minutes of the leader's time
to the Senator from Texas.
The PRESIDING OFFICER. The Senator from Texas is recognized.
Mrs. HUTCHISON. Thank you, Mr. President, and I thank the Senator
from Kansas for her leadership on this very important issue.
Mr. President, I want to speak specifically about the homemaker IRA
part of this bill. The homemaker IRA was put forward 3 years ago by
myself and Senator Mikulski. It now has 62 cosponsors. This is a matter
of simple fairness and equity. I cannot believe that we are standing
here today talking about this issue, because if you work outside the
home, you can set aside $2,000 a year which accrues tax free for your
retirement security. But if you are a homemaker working at home,
raising your children, contributing to this country and its stability,
you are allowed to set aside $250 a year.
If we can pass the homemaker IRA and allow the homemakers of this
country to be equal in their ability to contribute to their retirement
security for a one-income-earner couple, the difference will be
$188,554 for a 30-year accumulation at $2,000 a year versus $335,000, a
difference of $150,000, roughly. That is the difference in retirement
security that we can make today if we can pass this very important
bill.
The homemaker IRA had also been passed in the Balanced Budget Act
last year. It was included. It was vetoed by the President. This is a
bill I hope we will be able to see signed by the President. It is very
important for the many small business advantages, as well as the
homemaker advantages in retirement security. It is very important that
we send the bill to the President and that he sign it.
This is a big bill. It is a bill that has a lot in it. It has the
minimum wage, we have the Bond amendment, and we have the Kennedy
amendment. I am very concerned about the potential of adopting the
Kennedy amendment, which is a retroactive minimum wage increase and the
fact that that could kill the homemaker IRA bill, because I cannot vote
for a retroactive increase in wages that someone who is now in the
middle of the summer, who might have an inn or a restaurant and has set
prices according to what the wage scale is to all of a sudden wake up
and find that the costs are 20-percent higher.
I cannot vote for that. I think it is wrong. So I hope that we will
be able to pass this bill in a responsible way with some exceptions for
small business to give them the ability to continue to compete because
they do not have the advantages of the efficiencies of a large
business.
I hope that we will be able to pass the Bond amendment which will
have a minimum wage increase but one that can be provided and planned
for, one that will have some small business exemptions so that they
will still be able to compete.
I hope we can put together a package that will be signed by the
President that will be bipartisan, that will have the Bond amendment
protections of our small business people as we are also protecting the
homemakers and the people who are not now allowed to set aside $2,000 a
year for their retirement security but could if they worked outside the
home.
I commend Senator Kassebaum and Senator Mikulski who have been
working on homemaker IRA's for 3 years and the many cosponsors that we
have for that bill. I hope that we can put together a bill that will
not kill the small businesses of our country, and at the same time that
we can help the homemakers who are contributing to the stability of our
country every day and do not have the same advantages of retirement
security that those who work outside the home do. Thank you, Mr.
President.
Mrs. KASSEBAUM addressed the Chair.
The PRESIDING OFFICER. The Senator from Kansas.
Mrs. KASSEBAUM. Mr. President, I commend Senator Hutchison and
Senator Mikulski for the leadership they have provided on the homemaker
IRA's. I am pleased to have been a cosponsor, along with a number of
others. I think it is a very beneficial aspect of the Finance Committee
legislation that is before us. Senator Hutchison and Senator Mikulski
have fought some valiant battles to bring this to the public's
attention, particularly to the attention of the Congress.
I now will yield the remaining time on the bill to the senior Senator
from Missouri, Mr. Bond.
The PRESIDING OFFICER. The senior Senator from Missouri is
recognized.
Mr. BOND. I thank the Chair. Might I inquire how much time is
available?
The PRESIDING OFFICER. There are 13 minutes 35 seconds remaining.
Mr. BOND. I thank the Chair.
Mrs. KASSEBAUM. Mr. President, I say to my colleague, there are a few
minutes more of leader's time if the Senator from Missouri feels he
needs a few extra minutes.
Mr. BOND. I thank the distinguished Chair of the Labor Committee.
Mr. President, I rise today to talk about the provisions in my
amendment and to give some background to my colleagues on why this
amendment is important. I think by now everybody knows it would allow
small businesses, the smallest of the small, grossing less than
$500,000, the opportunity to continue to pay the minimum wage at $4.25.
Businesses grossing above $500,000 would begin paying $4.75 on January
1, 1997, and $5.15 on January 1, 1998.
Without this provision, this would be a retroactive minimum wage
increase. As the Senator from Texas has already pointed out, it means
that businesses who have laid out their plans, issued price lists, or
bid on contracts will find that somebody is going around and
[[Page S7464]]
reaching into their pockets and pulling out money that might not be
there. Without the delayed effective date, it is possible that small
businesses or a business of any size might find themselves working
under existing arrangements, contracts, price lists, for a loss if we
do the unheard of step of imposing a retroactive minimum wage. That
alone, I think, mandates the passage of this amendment.
In addition, we provide a training wage. A training wage is important
not only to get teenagers and young people into work, but to get people
coming off of welfare into a job, getting them started in the habits
that make a job a productive commitment and teach the skills that are
needed to hold a job.
The most important part of this amendment, however, is the small
business exemption. Why do we set out the exemption for the smallest of
the small businesses? Mr. President, as chairman of the Small Business
Committee, I have had the opportunity to talk with and, most
importantly, to listen to many small businesses around this country.
It is obvious to me that my colleagues, who are talking about how it
is no problem for small businesses to have a 20-percent increase in
what they pay minimum wage workers, have not been listening to the
small businesses. They do not know what burdens they are under. These
people who are getting started, they have an idea. They are willing to
take a risk. They are willing to take it all on their own shoulders.
They may work out of their house. They put their savings into their
ideas. Most of them work far more than a 40-hour work week. They are
just getting started--they are just getting started. If they become
successful, like a Microsoft, as soon as they hit $500,000 annual gross
revenue, then the minimum wage goes up to the full amount provided in
this bill.
Who does this affect? Well, Mr. President, among the people it
affects are the National Association of Women Business Owners, NAWBO.
This business organization has pointed out that between 1987 and 1996
the growth of women-owned firms continued to outpace the overall growth
of business by nearly 2 to 1 and revenues generated by women-owned
enterprises by more than triple. Almost 8 million women-owned
businesses exist in the United States, and many of those, as we have
heard in testimony before our committee, are very small businesses just
getting started. If they are getting started, if they are making a
success, we do not want to penalize them and their workers by imposing
on those smallest of the small businesses a burden that they cannot
handle.
These are Main Street businesses, mom and pop, and in many instances
a mom operation, working out of their garage, working out of their
basement, with 3 to 4 to 5 to 10 employees. This kind of increase in
the minimum wage is a 20-percent increase in their payroll costs for
those minimum wage workers. That is a real problem. That is why the
Administrator of the Small Business Administration under President
Clinton, Phil Lader, back on March 2, 1995, wrote to Secretary Reich,
the Secretary of Labor, saying, ``On balance, however, I believe that a
tiered system''--a lower minimum wage for the smallest businesses--
``would serve two public policy objectives: promoting small businesses
and preserving jobs.''
It is obvious that since then the ear to small business has lost out
in this administration. Organized labor and the Secretary of
``organized'' Labor have had their way. The Small Business
Administration is now saying they no longer support that. But when he
was speaking as a person who listens to small business, he said very
clearly we need a two-tiered system.
President Clinton has announced, as most of you have heard, that
exempting the smallest of the small businesses is a poison pill. I
frankly think that shows how little he understands how tight margins
these smallest of the small businesses work on. He has promised to veto
the legislation for that and a host of other provisions. I have to say
that I am very surprised and disappointed about the President's
characterization because the small business exemption has traditionally
had broad bipartisan support in this body.
Special minimum wage provisions for small businesses are not a new
concept. The Fair Labor Standards Act has contained small business
exemptions for well over 30 years. When the minimum wage was increased
in 1989, Congress made several changes designed to expand small
business protections. Congress eliminated the exemption from minimum
wage and overtime provisions for retail and service establishments
grossing under $362,500 and replaced it with a $500,000 threshold for
all types of businesses.
Unfortunately, the 1989 amendments did not provide a true exemption.
People did not realize at the time they did not provide the exemption
and actually expanded coverage of small businesses because Congress
failed to amend the portion of the minimum wage provision that covered
individual employees. As a result, all employees engaged in commerce
are covered by the minimum wage provision regardless of the revenue of
their employers, despite the fact that this Congress, people on both
sides of the aisle, thought they were giving the small business
exemption.
I was stunned to hear Senator Kennedy call this amendment cynical,
devious, and shameful. What a difference an election year makes, Mr.
President. It is obvious to me from reading the numerous floor
statements made in 1989 that Congress thought it was protecting small
businesses grossing under $500,000 from the Federal minimum wage and
overtime provisions.
For example, Senator Kennedy explained on the Senate floor that the
Labor Committee:
really bent over in our committee to try to consider the
impact of the increase of the minimum wage on small business.
That is why, when we initially considered the $4.65 minimum
wage, we increased the threshold exemption for small business
from $362,000 to $500,000 . . . we have been responsive, we
believe, to the concerns of the small business community.'
Those are Senator Kennedy's own words. I ask, was that statement
cynical, devious, and shameful? If not, what are the statements today?
A number of other people have come to the floor. I saw my good friend
from North Dakota speak just a few moments ago on the minimum wage.
April 11, 1989, he said on the floor,
The expanded enterprise test will do much to blunt the
effect of increasing the minimum wage on small businesses. It
is something the administration rightly sought, and I am glad
it has been included in both the committee-reported bill and
the compromise.
Senator Bingaman, during the 1989 minimum wage debates, on November
7, 1989:
This legislation also includes an increase in the exemption
for small businesses from $362,500 to $500,000. This increase
helps alleviate some of the concerns expressed by small
businesses throughout the Nation.
Mr. President, those concerns are still there, and even more so,
particularly when small business found that the 1989 amendments were
not responsive to the concerns of small business because what was
billed as a change exempting more businesses, actually resulted in
broader coverage, since the businesses grossing under $362,500 lost
their exemption.
Mr. President, this amendment is more modest than what Congress
intended in 1989 because no small business with employees engaged in
commerce would be completely exempted from the Federal minimum wage and
overtime provisions would not be impacted.
My colleague from Arkansas and the ranking member of the Small
Business Committee, Senator Bumpers, introduced in 1991 a bill that
would have corrected the problems caused by the 1989 amendments. If
enacted, the Bumpers legislation would have provided an exemption from
minimum wage and overtime provisions for retail and service
establishments grossing under $362,500. All other small businesses
grossing under $500,000 would have been exempted from the 1989
increase. In essence, a three-tiered system, no minimum wage below
$362,500, the existing minimum wage up to $500,000, and the increase
above. That bill had 48 cosponsors, 26 Republicans and 22 Democrats--
Twelve of those Democrats are still in the Senate. I call on them to
support a concept less far reaching than what they introduced and
sponsored as a bill in 1989.
When Senator Bumpers introduced his bill on February 5, 1991, he
said,
The clear intention was to protect the jobs of those who
work in the smallest companies from the backlash of a higher
Federal wage. However, the small business exemption has
[[Page S7465]]
inadvertently been rendered useless because of a subsequent
conforming amendment * * *
Later on he says,
We have, without intending to do so, given small businesses
an exemption which is meaningless and which has added to
their problems.
Congressional Quarterly, doing a story on June 8, 1996, quoted
Senator Bumpers as saying,
I've been a small businessman with less than $500,000 in
sales and I know this thing could be pretty detrimental.
Senator Kerrey, reacting to a statement that Democrats in the House
said the proposal would lead to the creation of a new class of
exploited workers said, ``If they were good Democrats, they were,''
referring to demagoging the issue.
Senator Pryor, on February 5, speaking in support of the Bumpers bill
said,
While these rates--talking then of a minimum wage increase
from $3.80 to $4.25--While these rates may not seem high, to
a mom and pop enterprise operating on a razor thin profit
margin, it could be the final wave that takes them under.
This seemingly innocuous omission in wording has in effect precluded
almost all small businesses from qualifying for the exemption Congress
obviously intended. If any of my colleagues have any doubt about
congressional intent, all they have to do is go back and read the
Record during the debate. Both proponents and opponents laud the small
business exemption.
Now, Mr. President, my amendment does not go as far as the proposal
made by Senator Bumpers in 1991. Unlike the Bumpers amendment, there is
no complete exemption from any business from the Federal minimum wage.
The amendment does not affect the FLSA overtime provisions. The
amendment simply maintains the status quo for America's small business
by allowing them to continue to pay $4.25.
Mr. President, I see I am probably approaching the end of my time,
and I ask for 5 minutes of the leader's time.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BOND. Mr. President, what we have today is an opportunity to
correct this mistake made in 1989 by enacting legislation that reflects
both Congress intent in 1989 and the Bumpers legislation that had such
broad bipartisan support in 1991. This amendment does not go as far as
what was intended in 1989 by a Democrat Congress and a Republican
President and supported in 1991 by a bipartisan group of Senators.
Twelve of the twenty-two Democrats who cosponsored Senator Bumpers'
bill in 1991 are still in the Senate. I call on them today to maintain
their earlier position so we can pass this amendment that is so
important to America's small business.
Let me focus just a minute on a couple of things that had been stated
in the media that this amendment does and does not do. Some statements
have been made that the amendment provides a complete exemption from
any minimum wage. I have stated that is simply not true. For those
exempted, it keeps the minimum wage at $4.25.
President Clinton talked about the amendment causing employees of
small businesses to be ineligible for an increase in their wages and
locked in to the current minimum wage. Who do we think provides wages
in this country? Is it Congress in its largess? No; it is the people
who have committed their time, resources, energy, and their capital to
providing the best jobs they can and the products and services that the
marketplace will take. Anybody who understands a market economy knows
that everyone in America is eligible for a raise.
The minimum wage is a floor, not a ceiling, and nothing in our
capital system or nothing in my amendment sets an upper limit on how
much a worker can earn. The purpose of the small business amendment is,
in fact, to make sure that America's workers continue to have the
opportunity to enter into the small business work force and earn raises
in the future.
I also ought to address the statements that have been made on this
floor totally, I think, without justification, that some 10.5 million
workers would be covered by this minimum wage exemption. That simply is
out of whole cloth. There are 10.5 million workers who are employed by
businesses grossing under $500,000, but this amendment does not affect
nearly that many. There are 11 States that have higher minimum wages.
Those workers would not be affected. It takes it down to 8.8
million. How many of those actually work at minimum wage? We do not
have the accurate figures, but the Small Business Administration's
advocacy counsel said approximately 10 percent of the workers in small
business earn the minimum wage. So we are talking roughly 10 percent of
8 million to 9 million people, or 800,000 to 900,000 people.
Phil Lader, the Administrator of the SBA, agrees with me--has agreed
with me in the past before he got his arms twisted--that the small
business exemption is a good policy because it impacts a small number
of employees while ensuring that firms at the margin will not be forced
to cut jobs or not grow. In the letter I cited earlier from Mr. Lader
to the Secretary of Labor, he said, ``an exemption for the smallest of
small businesses makes sense.'' Mr. Lader went on to state that:
An exemption allowing the minimum wage to stay at its
present level for firms would be a way of crediting the
smallest employers for costs they incur: (1) by employing
young workers in their first jobs; (2) by providing general
skills training to workers; (3) by hiring a large fraction of
part time, seasonal and contingent workers, and (4) by
bearing the cost of turnover associated with minimum wage
jobs.
Mr. Lader also pointed out that:
By maintaining the status quo, the smallest of small
businesses will be able to continue to provide jobs to the
marginally employable, an important public policy goal during
a time of near-full employment.
Mr. Lader concludes by saying he believes that:
rather than penalize workers in small firms, maintaining the
present minimum wage would enable these small employers to
sustain present employment levels without imposing the need
to make difficult choices to preserve profitability.
I agree with that position. I think that comes from a good
understanding of what small businesses have been saying. I am sorry
that he has not been able to maintain that position because the policy
of the White House has changed.
If you listen to small businesses, as members of the Small Business
Committee have, as I have done, and as the Small Business
Administration has done, you will know that small businesses, while
they have difficult battles in the marketplace, fear nothing more than
the heavy hand of the Federal Government--in this case the mom and pop
or the mom operation with 5 and 10 employees getting a 20-percent
increase in minimum wage mandated by the Federal Government which could
force them to lay off 20 percent of their workers. That is one out of
five, two out of 10, four out of 20.
People have called this cruel to say they can be exempt. Mr.
President, I think it is far crueler to throw these people out of work
by saying to small business that we cannot allow you to continue to pay
$4.25 an hour and make a profit on the business that you have
undertaken.
Small businesses under 500,000 deserve an exemption. On a bipartisan
basis Congress in the past thought they were giving them that
exemption. It is time to make good on the promises made by the
statements from our distinguished colleagues on the other side of the
aisle, as well as this body.
Mr. Lader and I both believe that an exemption for the smallest of
small businesses makes sense because it saves jobs. Unlike a
corporation that can pass increased labor costs on to the consumer, the
small, local grocery store or florist or hardware store doesn't have
that option and the owner is who is dealing with a 5-percent profit
margin is not taking home much money himself.
Mr. Lader's point about providing jobs to the marginally employable
is even more important today than it was 1-year ago when the letter was
written. The Department of Labor just announced that unemployment is at
a 6-year low. As Federal and State governments try to maintain this
level of employment and struggle to reform our present welfare system,
it is vital that we be able to rely on small businesses to continue to
provide jobs. I think that we should take Mr. Lader's advice and allow
these small businesses to remain at the current minimum wage so that
two important public policy goals Mr. Lader mentions--promoting small
businesses and preserving jobs--can be met.
[[Page S7466]]
My amendment also contains several provisions that have already
passed the House. The first two provisions were noncontroversial on the
House sides and I believe that the same will hold true on this side.
First, the amendment clarifies that employees do not have to be paid
for time spent driving to and from work in company vehicles. Second,
the overtime exemption for computer professionals making over $27.63
per hour is maintained.
My amendment also contains the same tip credit provision that passed
the House. Tipped employees would continue to be paid at least $2.13
per hour by their employers and would also earn tips. If the cash wage
of $2.13 and the tips did not add up to the Federal minimum wage, then
the employer would make up the difference. Thus, tipped employees, like
all other employees, would earn at least the Federal minimum wage.
My amendment contains an opportunity wage that would allow employers
to pay first-time employees $4.25 for 180 consecutive days. This
provision is designed to get unskilled people into the job market where
they can develop the good work habits that make advancement possible.
My amendment expands on the 90-day time period in the House bill
because employers are more likely to hire unskilled workers that they
have sufficient time to train. Unlike the House provision, my amendment
does not include an age limit because unskilled workers of all ages
much be permitted to enter the work force more easily.
As my distinguished colleague, Senator Chafee, pointed out on the
floor recently, Senators from both sides of the aisle are demanding
that people get off of welfare and work and we must provide some
incentive to employers for hiring unskilled workers. These people will
be working at this first jobs and will be provided with the skills they
need to advance and earn more.
Mr. Kennedy said recently that the ``downsized, laid-off workers in a
time of high unemployment'' will be hurt the most by the opportunity
wage. I would point again to the figures released recently by the
Department of Labor that show that unemployment has fallen to 5.3
percent, the lowest level in 6 years, and that wages are up to $11.82
per hour on average. President Clinton hailed the numbers as showing
that ``wages for American workers are finally on the rise again. These
figures indicate that the laid-off steelworker and the officeworker
with 30 years of experience that Senator Kennedy spoke of are not going
to be earning the opportunity wage. Instead, the opportunity wage is
going to allow access to the job market for unskilled workers with
little or no job experience, workers who otherwise would not have been
hired at all.
My amendment delays the implementation of the minimum wage increase
until January 1, 1997. This delay will help small businesses adjust and
minimize job loss. This is particularly true for small retailers that
hire more workers during the holiday season. A delay is also important
for employers that have committed to hiring teenagers for summer jobs.
As Federal funding for summer youth job programs dries up, we must
support private efforts.
America's small businesses have been extremely successful and have
created the vast majority of new jobs in the last decade. If we want
this level of growth to continue, and if we want to give America's
workers the opportunity to get in on the ground floor of some of
today's most profitable businesses, we must protect these businesses
from Federal mandates. I urge you to support my amendment so that the
opportunities available in America's small businesses continue grow.
UNANIMOUS-CONSENT AGREEMENT
Mr. BOND. Mr. President, I now ask unanimous consent that,
notwithstanding the previous order, at 2:15 p.m. today the Democratic
leader be permitted to make a statement utilizing his leader time to be
followed by the recognition of the majority leader to make closing
remarks on H.R. 3448, also using leader time; further, that immediately
following those remarks the Senate then proceed to the previously
ordered votes with the first vote limited to the standard 15 minutes
and all additional stacked votes reduced to 10 minutes in length.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BOND. Mr. President, I yield the floor.
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