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House approves dropping law that would withhold money from contractors behind on tax payments
WASHINGTON (AP) ' The House voted in near lockstep Thursday to repeal a law aimed at compelling government contractors to pay all their taxes, sparking squabbling over which party was doing the most to create jobs but leaving economists underwhelmed that much of anything had been achieved.
By 405-16, lawmakers voted to annul a 5-year-old law requiring federal, state and many local governments to withhold 3 percent of their payments to contractors until their taxes are paid. That measure was enacted by a Republican Congress and President George W. Bush in response to investigations showing that thousands of government contractors owed billions in back taxes. It is to go into effect in 2013.
Today's politicians are more concerned about the stubbornly high unemployment rate of 9.1 percent, the fury over economic inequity voiced by Occupy Wall Street protestors and the approach of next year's presidential and congressional elections.
That has left people in both parties, including President Barack Obama, saying the withholding should be scrapped because it would erode the cash that contractors have to hire more workers. Republicans were eager to categorize the bill as part of their year-long effort to attack government regulations as millstones on corporate America.
"It is clear that businesses across this country are feeling ill effects of regulatory and tax burdens placed upon them by continued policies coming out of Washington and this administration," said House Majority Leader Eric Cantor of Virginia, who called the bill "another step toward solving our job crisis."
House Republicans consider 15 other bills their chamber has approved and sent to the Democratic-run Senate to be jobs legislation. Many of them block energy and environmental regulations or streamline administrative procedures that Democrats say are necessary.
Annulling the withholding law would cost $11 billion in lost revenue over the next decade, according to Congress' Joint Committee on Taxation. More than half of the money the withholding law was expected to net was expected to come from accelerating tax collections that would have eventually been paid anyway, not from raising fresh money.
To pay for it, the House voted to make it harder for some Social Security recipients to qualify for Medicaid under last year's health care overhaul bill. That provision was approved 262-157 with solid GOP support and strong Democratic opposition.
Democrats acknowledged that the withholding law would do more harm than good, but they insisted that Republicans could hardly stake claim to being job saviors. They criticized the GOP for failing to act on most of Obama's $447 billion jobs bill or, for that matter, on any major jobs initiative.
"We've been here now nine months, and there is still no effort by the majority here in the House to bring up any meaningful jobs legislation," said Rep. Sander Levin, D-Mich.
Last week, the Senate voted narrowly against debating a Senate GOP version of the bill after Obama threatened to veto it because it would have been paid for with cuts in domestic spending.
Yet many Senate Democrats support repealing the withholding law, and the Senate is likely to approve legislation along the lines of the House bill as early as next week, said a top Senate Democratic aide who was not authorized to speak publicly on the matter and requested anonymity.
Away from the political din, economists said they expected the legislation to have limited impact, largely because the withholding requirement wasn't scheduled to take effect until January 2013.
"We're just codifying what's being done anyway," said Mark Zandi, chief economist of Moody's Analytics. "It's not as though we're changing something that would mean more money flowing."
Bill Cheney, chief economist for John Hancock Financial Services, noted that the federal government has long withheld money from workers' paychecks to cover their income, Social Security and Medicare taxes.
"Think about the economic impact of withholding on regular people," he said. "The only people whose behavior it really effects are those who are crooked or idiotic, who either don't plan to pay their taxes or forget about it and spend the money."
Thursday's one-sided House vote contrasted with a year that has seen sharp-elbowed political rhetoric and significant defections by members of one party or the other on high profile bills.
Republicans tried using Thursday's vote to pressure Senate Democrats to back the withholding repeal and to cast themselves as trying to work constructively.
""The overwhelming, bipartisan vote in the House on the 3 percent withholding provision shows that when Congress acts on areas of agreement ' rather than stimulus spending and tax hikes ' we can get things done," Senate Minority Leader Mitch McConnell, R-Ky., said in a written statement.
Also wasting little time pushing for final congressional approval were doctors, builders and financial services firms, which were among the scores of industry groups and companies that lobbied to block the withholding law.
The American Medical Association, which would be affected by withholding of Medicare payments to health care providers, issued a statement saying doctors were already facing Medicare underpayments, adding, "This additional burden is simply untenable."