By Stephen Cooper, Paula Cruickshank and Jeff Carlson, CCH Washington Staff Writers

The Senate overwhelmingly passed the Bankruptcy Reform Act of 1999, on February 2, 2000, by a vote of 83-14. But lawmakers are already looking to an upcoming House-Senate conference--which will reconcile both chambers' differing versions of the reform bill--as a means to revisit some the bill's controversial provisions, such as a minimum wage increase.

Sen. Chuck Grassley (R-Iowa), a chief supporter of the bankruptcy bill, said the comprehensive reform legislation deals even handedly with consumers who overspend and try to avoid paying their debts, banks that over market their credit cards, and lawyers who operate bankruptcy mills and take advantage of hardworking citizens in financial distress.

"I've always said there's plenty of blame to go around for the bankruptcy crisis: consumerism, overzealous creditors, bankruptcy lawyers who promote an easy fix, and the fact that there's no longer a stigma associated with bankruptcy," Grassley said. "To the extent that the code itself contributes to this problem, our comprehensive, bipartisian bill is the most effective way to address the problem."

The bill includes a host of provisions aimed at protecting consumers, penalizing abusive creditors, ensuring child support payments, and discouraging bankruptcy abuse by debtors. It also includes bankruptcy provisions affecting small businesses, municipal governments and family farmers.

Much of the bill has enjoyed bipartisan support, but several issues continue to raise conflicts that must be worked out in the House-Senate conference.

Minimum Wage Increase Offset by Small Business Tax Cuts

One of the most controversial packages in the legislation is a GOP-sponsored increase in minimum wage of $1 over three years, which is coupled with $75 billion tax cut plan. Democrats want the minimum wage raised over a two-year period, and they say the tax cut is skewed toward wealthier taxpayers.

The Senate Republican minimum wage proposal provides a $1 hike in three steps of 35 cents, 35 cents, and 30 cents over the next three years, starting in March 2000. The plan would provide an above-the-line deduction for health insurance premium expenses for individuals without employer-provided coverage, 100 percent deductibility for health care insurance premiums for the self-employed, and pension reform.

The bill also would accelerate and increase small business expensing, make permanent the work opportunity tax credit, reduce the Federal Unemployment Tax Act tax from 8 to 6 percent and increase the business meal deduction to 80 percent for small businesses and the self-employed.

Democratic Response

White House Press Secretary Joe Lockhart on February 2 said that the minimum wage provision in the bankruptcy bill is "unacceptable" because the attached tax cut proposals are not paid for and are skewed to those who do not necessarily need tax relief at this time. The administration also wants the minimum wage to be raised over a two-year period, not longer, and maintains the increase will not have a negative effect on the U.S. economy.

In remarks to reporters on February 2, Senate Minority Leader Thomas Daschle (D-S.D.) said that Democrats would try to "fix" the minimum wage proposal in conference. He also predicted that the unrelated tax provisions in the bill would be rejected by House lawmakers, since they originated in the Senate and not in the House.

Daschle released a copy of a Democratic letter to the bankruptcy conferees urging that the GOP tax provisions and minimum wage increase be stripped out of the bill. "In addition to failing to target the tax relief to help working families, provisions in the amendment could result in some people losing their existing health and pension coverage," the letter says.

Sen. Edward Kennedy (D-Mass.) said the GOP proposal gives 10 million workers a watered-down minimum wage increase with one hand and, with the other hand, it reduces the overtime pay of 73 million workers and provides $75 billion in tax breaks for the wealthy. He noted that the bankruptcy bill fails to acknowledge that personal bankruptcy filings have declined in the last year without any action on the part of Congress.

Related items:

Decline in Personal Bankruptcies Downplays Need for Bankruptcy Reform Bill

House Passes Its Version of Bankruptcy Reform Act of 1999

Bankruptcy Reform Act of 1999 Introduced in the House

Bankruptcy Reform Stalls in the Senate