Senate Democrats are dropping a plan to raise the federal minimum wage through a corporate tax penalty amid concerns that its inclusion in the $1.9 trillion coronavirus relief package could delay the bill's passage, according to a source familiar with the matter.
The plan, introduced last week by Senate Finance Chairman Ron Wyden and Senate Budget Chairman Bernie Sanders, included tax penalties on large corporations that fail to pay $15 an hour and incentives for the "smallest of small businesses" to encourage them to raise their wages.
The proposal came after the Senate parliamentarian, a non-partisan referee, ruled Thursday that increasing the minimum wage to $15 from $7.25 an hour is not compliant with rules under budget reconciliation, the tactic that Democrats are using to fast-track the stimulus bill with a simple majority in both chambers.
The finding by Elizabeth MacDonough dealt a major blow to progressive lawmakers, who have tried for years to raise the federal minimum wage from $7.25 to $15 an hour and viewed Biden's nearly $2 trillion relief package as the best avenue to do so.
But after working over the weekend, it became evident that getting all 50 senators in the Democrats' caucus to reach an agreement on the alternative minimum wage push could slow down the relief bill's passage and risk missing the self-imposed March 14 deadline, when millions of Americans will lose their unemployment aid, the source told FOX Business.
Economists and tax experts also questioned the efficacy of the "Plan B" minimum wage push, arguing it would be easy for large corporations to circumvent the financial penalty by outsourcing jobs or reclassifying workers as contractors.
"I would be extremely nervous about trying out a brand new idea like this with virtually no vetting," said Jason Furman, a former economic adviser for the Obama administration.
The White House has not indicated support for the corporate tax penalty idea, but has maintained that Biden is "firmly committed" to raising the pay floor.
Progressive lawmakers launched a last-minute pressure campaign last week urging the Biden administration to overturn the parliamentarian's decision, but White House press secretary Jen Psaki ruled out that option.
The House passed the relief bill early Saturday morning, including the provision to gradually increase the minimum wage to $15 per hour by 2025.
The federal minimum wage has not increased in more than a decade, although a growing number of states have voted to adopt their own wage increases. There are 29 states with wages above the federal minimum wage, according to the National Conference of State Legislatures. At $14 an hour, California currently has the highest minimum wage in the nation.
Raising the minimum wage from $7.25 to $15 an hour by 2025 would cost the economy about 1.4 million jobs and would lift 900,000 Americans out of poverty, according to a recent analysis by the nonpartisan Congressional Budget Office.
Fox News' Jason Donner contributed to this report