A House committee this week approved a $1.3 billion bipartisan tax package for small businesses aimed at boosting support for an increase in the federal minimum wage.

The Small Business Tax Relief Act of 2007, which the House Ways and Means Committee passed unanimously on Monday, would extend tax credits for small-business owners, while raising the amount of capital spending they can write off every year.

Lawmakers said the move paves the way for a compromise bill between the House and Senate that balances tax relief for smaller business with a $2.10 hike in the federal minimum wage over the next two years -- an initiative Democrats have called a legislative priority. The federal minimum wage has stood at $5.15 per hour since 1997.

In January, the House approved the increase without tax breaks or other relief measures for employers of any size. In the Senate, where Democrats have a smaller majority, lawmakers attached $8.3 billion in tax-relief measures over 10 years for smaller businesses.

House Democrats have said an increase in the federal minimum wage is long overdue and should stand on its own. For his part, President Bush has said he will only support an increase that includes help for employers.

"Today's action is a good way of showing that this Congress can, and intends to, work in a bipartisan way," Rep. Charles Rangel (D-N.Y.), the committee chairman, said in a statement on Monday.

Rangel said the bill will help "strengthen economic opportunity for small-business owners."

Rep. Jim McCrery (R-La.), the ranking member on the committee, said the proposed tax cuts will help small businesses that are hit hardest by higher labor costs as a result of wage increases.

"This bill will provide nearly $2 billion in tax relief, and unlike the Senate bill, much of that relief will be immediate -- helping business when costs are rising, not just down the line," McCrery said in a statement.

About two million workers nationwide are paid the federal minimum wage or less, according to the Labor Department.

According to congressional estimates, the tax cuts approved on Monday could cost the treasury as much as $1.3 billion over the next 10 years.

Under the bill, part of those costs would be offset by closing a tax shelter that currently allows wealthy taxpayers to pass along investment income to their children, lawmakers said.

The bill is expected to be taken up by the full House later this week.