House votes to repeal contractor withholding tax

The House voted 405-16 on Thursday to repeal a law requiring governments at the federal, state, and local levels to withhold 3 percent of what they would pay most contractors until those vendors have fully paid their taxes.

But it remains uncertain what the Senate will do.

Last week, Senate Democrats prevented similar legislation from reaching the floor; they objected to covering the cost of the repeal by directing the executive branch to rescind funds and make further cuts to discretionary spending in 2012. The White House threatened to veto that measure because of those pay-fors.

[Related: Repeal of 3 percent contractor tax withholding gathers steam]

But the Republican-pushed House bill passed on Thursday would cover the cost of undoing the contractors' tax with a fix to the 2010 health care law that would tighten Medicaid eligibility requirements, saving $14 billion. That fix was passed earlier on Thursday, 262-157.

The Obama administration has backed the House bill. But how a final version will be worked out with the Senate remains ambiguous. The Office of Management and Budget has also said the administration would be willing to work with Congress to identify "acceptable offsets" for the repeal's budgetary costs.

Senate Majority Leader Harry Reid, D-Nev., said last week he would take up the House bill, though he said he wanted to pay for it with elimination of a corporate-jet subsidy and tax breaks for multinational corporations, an approach Republicans oppose.

Some Democrats are reluctant to use the Medicaid savings to offset the cost of eliminating the withholding tax, preferring to save the offset for other legislation. Whatever the approach to paying for it, Reid said he was confident the withholding tax will be repealed. "I don't think people are too far apart on this," Reid spokesman Adam Jentleson said.

The contracting rule was originally devised in 2006 as a means of combating tax avoidance, but has never been implemented and has drawn the ire of Republicans and Democrats alike as a burdensome requirement on potential job creators.

Implementation had been delayed earlier this year until the end of 2012. But President Obama proposed in his jobs package this fall that the regulation be delayed until 2014.

The Medicaid-related bill is a rare glimmer of bipartisanship when it comes to the 2010 health care law. The White House and some congressional Democrats, although not all, want to see the "fix" passed to alleviate a larger budget crunch on the already-strapped Medicaid program.

The bill would undo a piece of the 2010 health care overhaul that would have made more than a million seniors newly eligible for Medicaid, because Social Security income would no longer factor into eligibility.

The president included the $14 billion cost-saver in his latest deficit-reduction package, and the White House did not threaten to veto the House bill passed on Thursday sponsored by Rep. Diane Black, R-Tenn.

But House Democrats largely voted against that bill because they would rather use the Medicaid funds to cover the cost of other health-related bills, like the looming Medicare doctors' pay fix that Congress must deal with by the end of the year.

"It certainly has been raised in my caucus," Rep. Allyson Schwartz, D-Pa., said in an interview.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.


When you download a report, your information may be shared with the underwriters of that document.