Signaling a brief spark of bipartisanship in Washington, the White House on Tuesday said it backs House Republicans’ effort to repeal a 3 percent withholding tax on government contractors, which is part of the GOP’s own job-creation push.
The White House said repealing the withholding will leave businesses with more cash to invest and create jobs at a time when the economy is still struggling.
“This would complement the administration’s other efforts to help small businesses. Repeal of the withholding requirement would also reduce implementation costs borne by federal and other governmental agencies,” the White House said in a statement of policy.
The 3 percent withholding requirement was passed in 2006 as a way to crack down on government contractors who were suspected of cheating on their taxes, and was supposed to take effect this year. But businesses protested, arguing that compliance costs would far outweigh the $11 billion the government would reap in better tax payments.
The IRS has already delayed the requirement until 2013, and Mr. Obama and congressional Republicans now say they want it repealed altogether.
Mr. Obama included it in his jobs plan last month, and House Republicans immediately signaled it was one of the few areas where they believed they could work with the president to get something passed.
Senate Republicans tried to pass a similar bill last week, but the administration opposed that version, arguing against the $30 billion in spending cuts the GOP attached to the measure.
The House bill, though, will be paid for by coupling it with a change to the way income is calculated for purposes of Medicaid and health exchange eligibility under the new health care law. The changes are expected to save enough money to cover the costs of repealing the withholding.