To amend the Internal Revenue Code of 1986 to provide for small business tax incentives, to amend the Fair Labor Standards Act of 1938 to increase the minimum wage and to increase the exemption for annual gross volume of sales made or business done by an enterprise, and for other purposes.

This bill proposes a combination of changes to federal labor laws and the tax code designed to balance a minimum wage increase with financial relief for small businesses. It would raise the federal minimum wage in stages to $6.50 per hour by 2007 and increase the minimum wage for tipped employees to $3.25.

To offset the costs for employers, the legislation would provide permanent tax incentives for business equipment purchases, create a $2,500 standard tax deduction for home-office expenses, and expand tax credits for research and hiring. Additionally, the bill would exempt businesses with fewer than ten employees from federal minimum wage requirements and increase the revenue threshold used to define which small businesses are subject to these labor laws. For individuals receiving Supplemental Security Income (SSI), the bill ensures that the resulting increase in wages would not automatically disqualify them from their benefits.