House Passes Three Percent Repeal

October 27, 2011

On Oct. 27, the House passed legislation, H.R. 674, that repeals a 2005 law requiring all federal, state and local governments to withhold three percent of payments to contractors.

The bill passed 405 to 16, with only Democrats voting against it, but thanks to the tireless bipartisan efforts of House champions Reps. Wally Herger (R-Calif.) and Earl Blumenauer (D-Ore.).

According to the rule adopted by the House, H.R. 674 has been combined with H.R. 2576, which was also approved by the House today with bipartisan support, into one measure. H.R. 2576, in essence the offset, would adjust the income qualifications for purposes of determining eligibility for certain healthcare-related programs, such as Medicaid and the Children’s Health Insurance Program. The repeal is estimated to cost $11 billion while the health care bill will generate $13 billion. The administration endorsed both H.R. 674 and H.R. 2576.

The repeal now moves to the Senate where an earlier version failed to pass last week.

On Tuesday, Nov.1, Sen. Scott Brown (R-Mass.) held a press event urging Senate Democrats to move quickly on the repeal of the three percent withholding provision. During the event, Brown said “My hope is that this three percent withholding will pass with flying colors, as it should, to show the American people that we can agree on something for jobs and job creation.”

Senate Democrats and Republicans have disagreed over how to make up for the roughly $11 billion in revenue over a decade that would not be collected if the provision is rolled back. Brown, whose own proposal to eliminate the withholding rule did not clear a procedural vote last month since it called for making up the lost revenue by rescinding unused discretionary funds, introduced the same repeal legislation on Monday that passed the House last week.

It remains unclear whether Senate Democrats will jump on board with Sen. Brown’s path forward especially since Senate Majority Leader Harry Reid (D-Nev.) said that he would prefer to use tax breaks for corporate jet owners and other revenue-raisers to pay for repeal. The majority leader has also said he wants further assurances that contractors are compliant on their taxes.

Brown, meanwhile, said he hoped that taking aim at the three percent rule would be just one of several areas included in President Barack Obama’s $447 billion jobs package where the two parties could find common ground.

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