Bipartisan opposition to 3% tax withholding
Senate Minority Leader Mitch McConnell (Brian Yaklyvich/ CNN)
October 25th, 2011
06:07 PM ET

Bipartisan opposition to 3% tax withholding

Unless Congress takes action, all bills paid by the federal government for goods, services or property after January 1, 2012 will be subject to a 3% tax withholding. The original provision was a revenue-raiser inserted into the Tax Increase Prevention and Reconciliation Act signed by President George W. Bush back in 2006. The idea was that the 3% withholding would count toward the vendor’s tax liability, meaning that at the end of the year whatever money was withheld by the government from a vendor would count as part of the total amount owed by a company back to the government in taxes.

It was seen as one way to ensure that contractors hired by the government are paying what they owe in taxes.

But because the withholding doesn't take into account the actual size of a company’s tax liability, only the revenue it is due to receive from the government, opponents like the Government Withholding Relief Coalition view the provision as "forcing companies to provide the federal government with an interest-free loan."

Well, now both the Obama Administration and Republican leadership in the Senate are on the same page when it comes to repealing this withholding. Today the Office of Management and Budget released a Statement of Administration Policy supporting the passage of H.R. 674 – a bill “to amend the Internal Revenue Code of 1986 to repeal the imposition of 3 percent withholding on certain payments made to vendors by government entities.”

“The repeal of the withholding requirement in H.R. 674 would reduce a burden on government contractors who otherwise comply with their tax obligations, particularly small businesses,” the OMB statement read, before going on to point out that the administration had originally proposed the repeal as part of its American Jobs Act.

OBM also acknowledged the original intent of the provision by stating, “The Administration also believes it is important to ensure that Federal contractors are compliant with tax laws and supports more targeted efforts that prevent persons with outstanding tax debts from receiving Federal contracts.”

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell was quick to agree with the thrust of the administration’s statement, but warned about re-packaging repeal of the provision with other Democratic job-creation measures that the senator would not support.

"Sen. McConnell is encouraged to see that the President will now support this provision of his own bill,” Stewart said, alluding to the repeal provisions original placement in the president’s jobs bill. “While we tried to pass it last week with a different bipartisan offset, Democrats blocked it. Now, with the President’s support, the Senate should take it up next week, without adding poison pills, and send it to the President for his signature."

Topics: Mitch McConnell • OMB

soundoff (10 Responses)
  1. Bob

    Mitch McConnel is a jackass of the highest order. The man is a pure liar, nothing more.

    October 25, 2011 at 6:38 pm |
  2. Rick McDaniel

    Reid will not pass anything Obama hasn't approved first. He is nothing but Obama's puppet.

    October 25, 2011 at 6:52 pm |
    • Trace


      Your brain doesn't allow you to be rational and make any sense...does it?

      When MOST people are talking about serious issues concerning the country's economy and future, you are stuck on silly high school name calling. Is that the extent of your intellect or vocabulary; which is it?

      October 26, 2011 at 12:56 am |
  3. MTATL67

    What a surprise that the obstructionists to recovery would agree with President Obama. Now the obstructionists can say they helped small businesses….but ever so slightly and not enough to get my vote.

    October 25, 2011 at 7:11 pm |
    • C-Lo

      Actually MTATL, the obstruction of this came from Senate the last lines of the article, and bear in mind that this site is slanted favorably to the Pres and Dems to begin with.

      October 27, 2011 at 12:11 pm |
  4. jean2009

    Which basically means government contractors will be allowed to continue stiffing the government for the taxes they owe, while at the same time being allowed to continue to receive government contracts. Interest free loan my eye! If they don't pay their taxes it is a federal tax-free gift.

    Hello....Am I the only one who thinks this is wrong?

    The face you are looking at above is pure evil....and what is totally wrong with this country.

    October 26, 2011 at 12:31 pm |
    • C-Lo

      Apparently you are one of the few who thinks this is wrong, as Obama himself agrees with it. You have to dig deeper than the surface (which I know you usually try to), but from my understanding this is "relief" for contractors who have not had any tax filing/paying problems, as they have shown a history to pay taxes owed on all business. Kind of the small business owners' version of the housing bailout O discussed yesterday–providing homeowners who have otherwise been responsible to take advantage of the lower interest rates (a rate-in-term refi) in situations where they would not otherwise be able to because of the housing valuations.

      These are the types of programs that should have had focus at the beginning of his presidency, not 3 years after the fact when his poll numbers are at all time lows and he appears to be pandering for votes–suddenly latinos, small business owners, RESPONSIBLE homeowners and students (his lifeline in the last election) are his focus. Whether or not these moves are pandering is up for debate, but the timing and target groups sure makes it suspicious.

      October 26, 2011 at 12:52 pm |
  5. bobinNC

    This is really a small issue, the biggest waste in government are those in the upper food chain. How much does congress member, House member, President wife, General Officer, High level cabinet spend on their offices, travel and everyday expenses that most worker have to pay for out of thier pockets. Go to a government brief look at all the notebooks of brief left on table afterward or food served at no cost, look at how much is spend on travel to meeting that could have been done with those 40K VTC systems. Congress want to cut military benefits and civilian benefit, show me who has more benefits than the politicians themselves, I don't know of a job that pay retirement benefit after ONE term. Those running this government are just as bad as those on Wall Street or at your local bank.

    October 26, 2011 at 1:22 pm |
  6. Liz Carter in Georgia

    That's right Trace! I've noticed Rick as nothing else BUT a staunch, pure OBAMA hater and certainly has shown himself to have disdain for liberals/Dems who support his cause, message, and political stance inside and outside of WASHINGTON. If it was true, and I remember when everybody was laughing and announcing REID and OBAMA were at odds on many issues! 'EVEN HIS OWN PARTY IS AGAINST...blah-blah-blah'! Why wouldn't REID wait until OBAMA approves before he tries to get something through? THEY'RE DEMOCRATS!

    October 30, 2011 at 9:30 am |
  7. Liz Carter in Georgia

    I remember when the previous president GWB, who eventually had to take the blame for mostly everything that occurred to cause AMERICA to slip off of its footing, as being the puppet. He was the President in title only! a stupid one, and they knew it so CHENEY, ROVE, RUMSFELD, and the rest of the 'BUSH MACHINE' benefactors used him as their puppet! They knew that if an investigation into anything the GOP decided to unlawfully due insued BUSH would be the first man down. Now who's the puppet? Poor LIL'DUBYA'!

    October 30, 2011 at 9:52 am |