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Withholding Tax Expected To Be Axed

October 27, 2011 by  

Withholding Tax Expected To Be Axed

House lawmakers are expected to approve legislation today to repeal an Internal Revenue Service plan to withhold 3 percent of payments to contractors at every level of government.

The withholding tax was designed to go after contractors who were delinquent on their taxes, but lobbyists say it is burdensome to taxpayers and an example of government overreach, according to The Hill.

Once the measure moves through the House, it is expected to gain steam in the Senate. Last week, 57 senators voted for an appeal, just three votes short of what was needed for passage.

Implementation of the tax has been delayed more than once since it was created in 2006. The 2009 stimulus packaged pushed it to 2012; and last May, the IRS delayed it until 2013.

Lost revenue from withholding tax repeal will be offset by legislation sponsored by Representative Diane Black (R-Tenn.) that sets strict limits on Medicaid eligibility, a move that was recommended by the President to the supercommittee, according to The Hill.

Lawmakers who were in favor of the tax fear that repeal means more avenues for government contractors to cheat tax obligations. Reportedly, they are calling for other measures to enforce tax codes in the absence of the withholding tax.

Sam Rolley

Staff writer Sam Rolley began a career in journalism working for a small town newspaper while seeking a B.A. in English. After learning about many of the biases present in most modern newsrooms, Rolley became determined to find a position in journalism that would allow him to combat the unsavory image that the news industry has gained. He is dedicated to seeking the truth and exposing the lies disseminated by the mainstream media at the behest of their corporate masters, special interest groups and information gatekeepers.

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  • Mary

    Typical government action. Create a new law to punish ALL contractors rather than enforce one that allows withholding on delinquent ones. Why not just use the existing backup withholding rules and withhold 20% on the delinquent contractors who are creating the problem.

    • Morduin00

      BTW Mary, despite my post below. I agree with you 100%. Punish the perpetrators.

      For those who may see my two statements as contradictory… while tax is punishment… punishment is not tax.

  • Phil F

    Withholding for individuals should also be abolished and everyone made to pay their income taxes on April 15th so people can see just how much they pay the wasteful federal government. If people really understood how much the government steals from them every year they’d be up in arms.

  • Morduin00

    Anyone see something else wrong with this? Other than taxes, rules, regulations and laws that don’t apply equally across the board (making them unconstitutional BTW).

    How about the fact that it now takes a super-majority in congress to pass a bill? To my recollection, this was first done by the democratic congress during the first Bush’s term and has carried through subsequent congresses. Just another example on how government is broken and needs to be repaired by the bandage that is the Constitution.

    • ChristyK

      I would like a constitutional amendment to require a 60% or 2/3rds majority to pass bills. The less they pass, the less trouble they can cause. Let’s also require all laws to be renewed in 10 years or they go away.

  • Bluff Rat

    Why do we give contracts to businessmen who are delinguent? Why not make being current on taxes a requirement to bid on government projects?

    • independant thinker

      Because that is logical and makes sense.

  • Ed B

    Why not require the government to withhold taxes from contractors? The government forces employers to withhold taxes from employees and the contractor are really the same as government employees. I really agree with Phil F that all withholding should be abolished for US citizens but should be enforced for foreign nationals who can easily avoid the taxes they should be paying.

  • proud to fight and serve my country

    It is time for the Democrats to have a filibuster on the floor of the House, if they have the guts to do it.

  • D. M.

    The left of Government and unions thinks of “We the people” as insignificant insects to be used and ignored in the system as “Tribute Slaves”, Sheeple, and pawns.


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