House members back contractors in pay fight

A bipartisan group of House members might put an end to a longstanding, but never enforced, tax provision that requires the government to keep back three percent of payments to a contractor.

The tax provision has been promoted as a way to tighten the tax gap and make delinquent companies pay their share of taxes, but its opponents say the provision would be unfair to businesses.

Ways and Means Committee Chairman Rep. Dave Camp (R-Mich.) supports the repeal of the 3 percent withholding provision in law, a spokeswoman said.


Related stories:

IRS postpones 3 percent withholding tax on contractors

Business groups hold onto hope for contractor tax repeal


Rep. Wally Herger (R-Calif.), a senior member of the committee, said the committee recognizes the importance of removing the law, and that Camp has expressed interest in taking action this year.

Herger has introduced legislation to kill the provision and similar legislation is in the Senate.

“Yes, it’s a problem when government contractors don’t pay their taxes,” Herger told a hearing held by the Small Business Committee’s Contracting and Workforce Subcommittee. "But instead of slapping a new tax on everyone—a tax that will actually cost the government more to collect than it raises in revenue — we could simply stop awarding government contracts to people who cheat on their taxes."

Others supporting a repeal of the provision include Rep. Mick Mulvaney (R-S.C.), the subcommittee's chairman, and Rep. Judy Chu (D-Calif.), its ranking member.

Many small business contractors work for the government for less than a three percent margin, Mulvaney said.

Thus far, none of the legislation has been considered by committees. But the provision remains unenforced because lawmakers and regulators have continually postponed its effective date. Most recently, on May 9, the IRS pushed back the date until 2013.

At the May 26 session, Rep. Jeff Landry (R-La.), a freshman, struggled to understand the reasons behind such a tax provision.

“I wonder, how do people come up with ridiculous legislation,” Landry said.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
close

Trending

  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Our databases track awards back to 2013. Read More

  • Navigating the trends and issues of 2016 Nick Wakeman

    In our latest WT Insider Report, we pull together our best advice, insights and reporting on the trends and issues that will shape the market in 2016 and beyond. Read More

contracts DB

Washington Technology Daily

Sign up for our newsletter.

Terms and Privacy Policy consent

I agree to this site's Privacy Policy.