Bloomberg News

House Vote to Repeal Contractor Rule Builds Pressure on Senate

November 04, 2011

Oct. 28 (Bloomberg) -- Senate Majority Leader Harry Reid will return to Washington next week under pressure to advance legislation repealing a requirement that governments withhold 3 percent of payments to contractors.

The House of Representatives passed the repeal legislation yesterday, 405-16, and also passed a bill that would offset the repeal by changing provisions of the 2010 health-care law. President Barack Obama has said he would sign both measures.

The Senate, which is controlled by Democrats, was unable to agree on an offset before adjourning for a week-long recess on Oct. 21. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said the chamber should vote on the repeal with the House offset next week.

“The Senate should take this up next week, without any poison pills, and send it to the president for his signature,” McConnell said in an e-mailed statement yesterday. “Let’s vote on it and prove the skeptics wrong by acting in a bipartisan fashion.”

Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce, called for the Senate to “put politics aside and pass the 3 percent repeal once and for all.”

Businesses Oppose Rule

The Chamber of Commerce and other business groups oppose the withholding requirement as too onerous.

Reid hasn’t announced whether the Senate will vote on the repeal next week. Adam Jentleson, the Nevada Democrat’s spokesman, said Democrats are “working out a path forward.”

In a separate 262-157 vote, the House agreed to offset the repeal’s cost by altering the 2010 health-care law to include the nontaxable portion of Social Security benefits in the definition of income used to calculate eligibility for government health-care programs. It would push some people from Medicaid into subsidized coverage in new health-insurance exchanges and would push others out of subsidized coverage.

Representative Sander Levin of Michigan, the top Democrat on the Ways and Means panel, said the offset could cause up to 500,000 people to lose their health-care coverage. He said he would have preferred to pay for the repeal by ending tax benefits for the oil and gas sector. Still, he supported the repeal measure.

“It should have happened earlier,” Levin said of the repeal. “It’s not nearly targeted and it would indeed impose significant and costly burdens on federal, state and local governments.”

Senate Measure

The House voted on the repeal a week after a similar repeal measure was blocked in the Senate because of disagreements over an offset. The Senate bill, offered by Republicans, would have covered the cost of repeal by tapping unused federal funds.

Reid said Oct. 21 that he would offer a repeal bill that would be offset through new taxes on corporate jets and curbs on the credits that can be claimed by companies that pay taxes to other countries.

Congress passed the withholding requirement in 2006 to combat tax evasion among government contractors. Senator Charles Grassley, an Iowa Republican who developed the withholding rule, has said he is working with Senate Finance Committee Chairman Max Baucus, a Montana Democrat, to propose an alternative that would still address tax compliance among contractors.

The House withholding repeal bill is HR 674 and the health- care offset measure is HR 2576.

--Editors: Jodi Schneider, Jim Rubin.

To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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