Senate Votes To Repeal Withholding Tax On Government Contractors

November 11, 2011
FedCyber Wire, Financial
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The U.S. Senate on Thursday voted to repeal a 3% withholding tax on government contractors after tacking on incentives to hire veterans from the last decade of wars, coming together for a brief moment before Veteran’s Day during tense negotiations over cutting the federal deficit.

The vote was 95-0. If approved by the U.S. House of Representatives in its current form, as expected, the measure will also allow U.S. President Barack Obama to claim victory on a small piece of his jobs package.

The withholding tax, to take effect in 2013, became law under U.S. President George W. Bush at a time when contractors were falling short on tax payments. But many contractors operate on tight margins and say they would have cash-flow problems if federal, state and local governments were required to withhold 3% of payments for goods and services. At the same time, it would cost the government money to withhold payments and then reimburse contractors who were paid up on taxes. In September, Obama had proposed delaying implementation of the withholding requirement through a bigger jobs package. The White House indicated on Thursday that it “strongly supports” striking the program altogether.

via Wall Street Journal, continued here.