Senate Argues Over Overtime, Corporate Tax Breaks

A Senate battle on overtime pay is erupting in the midst of a corporate tax bill designed to end a trade dispute with Europe and cut taxes for American manufacturers.

Democrats want to use the bill to combat the administration's effort to rewrite rules that outline when businesses must give their employees overtime pay (search). Republicans, trying to shut down any opportunity for that debate, have scheduled a vote Wednesday that could block unrelated items from the tax bill.

Republicans, who hold 51 of the Senate's votes, need 60 votes to prevail.

Senate Democrats confidently predicted they can defeat the GOP maneuver, which is aimed at shutting down debate over the president's new rules for overtime pay.

"We have the votes," said Senate Minority Leader Tom Daschle, D-S.D.

Republicans fretted that the Democrats' amendments delay an already late remedy to a trade disagreement with Europe that has socked penalty tariffs on some American exports.

"We are now facing an attempt to defeat this bipartisan measure by injecting a politically charged amendment," said Senate Finance Committee Chairman Charles Grassley, R-Iowa.

The administration last spring issued new rules that they say represent a needed update to regulations first laid out in the 1938 Fair Labor Standards Act (search). Republicans say the proposal would clarify confusing regulations and reduce an increasing number of lawsuits by workers seeking overtime pay. Opponents say the changes would cost 8 million workers their overtime pay.

Federal law generally grants workers overtime pay equal to the rate of time-and-a-half if a worker puts in more than 40 hours a week. The proposed regulations rewrite technical provisions, some dating to 1949, to define which "white collar" workers would be exempted.

The Senate voted last fall to block any changes that would strip overtime pay from workers now eligible. Six Republican senators split with the administration and sided with Democrats to prevent workers from losing overtime pay.

Acting as the arena for the overtime debate, the tax bill enjoys generally broad support. It would revoke a tax break declared an illegal export subsidy in international trade courts.

Until lawmakers eliminate the tax break for exporters, certain American exports from jewelry to agricultural goods face a 5 percent penalty tariff that ratchets up 1 percentage point each month over the next year.

GOP tax writers peppered the corporate tax cut (search) with small items that have big appeal to Democratic lawmakers, hoping to attract their support.

The changes include a new tax deduction for mortgage insurance (search), bonds and tax credits for rural development, and tax breaks for employers who continue paying workers called to active duty in the National Guard and reserves.