US Congress votes to boost minimum wage, cut taxes

WASHINGTON, May 25 (Reuters) Legislation to provide the first increase in the federal minimum wage in a decade won final US congressional approval and headed to President George W Bush to sign into law.

Democrats promised the pay boost for millions of America's lowest-paid workers in capturing control of Congress in last November's elections from Bush's Republicans.

The measure would increase the minimum wage over two years to 7.25 dollar per hour from 5.15 dollar, and -- to avoid a threatened Bush veto -- provide 4.84 billion dollar in small business tax breaks over 10 years to help pay for it.

After months of wrangling, the legislation was tucked into a hotly contested bill backed by the president to fund the Iraq war.

The House of Representatives approved it, 348-73, and the Senate then gave its needed concurrence with 80-14.

''This package will help millions of American workers better cope with the rising cost of living while helping our businesses expand and hire new workers to keep our local economies vibrant,'' said Democratic Rep Charles Rangel of New York, chairman of the House Ways and Means committee.

The tax provisions include an extension of existing tax breaks for investments in new equipment and for hiring veterans and people with special needs. The cost would be offset by changing rules on interest and penalties, and on treatment of investment income for dependent children. It would also raise fees for bad checks to the tax-collecting Internal Revenue Service.

Passed just hours before Congress headed off for a Memorial Day recess, the sweeping spending bill would provide about 100 billion dollar for the wars in Iraq and Afghanistan and another 20 billion dollar for a variety of domestic programs.

It includes additional money for farmers who lost crops due to weather damage, increased funds for poor children's health insurance, another 1 billion dollar for homeland security and about 4.1 billion dollar in hurricane disaster relief.

The increase in the minimum wage was the first major Democratic campaign promise to win final congressional passage.

Those still pending include ones to reduce the cost of education and prescription drugs, roll back some tax breaks for big oil companies and move toward energy independence.

Democrats' biggest challenge remains to fulfill a vow to begin a phased withdrawal of US troops from Iraq.

REUTERS SZ PM0753