Senate jousting over President Obama’s jobs bill will continue late Thursday or early Friday.
The leaders of both parties have each teed up test votes on separate provisions from the bill, for opposite political reasons. For Democrats, the relentless push for votes on pieces of the bill is meant to build a narrative voters understand: Dems support legislation that will create jobs; Republicans don’t. Dems support paying for jobs bills with tiny tax increases on millionaires; Republicans support those millionaires.
But two can play at that game.Republicans have identified one piece of Obama’s jobs bill they can all support: a measure that repeals a law meant to prevent government contractors from skimping on their taxes. The so-called “three percent withholding rule is a Bush-era law that once had bipartisan support but Republicans now overwhelmingly oppose. It requires the federal government to husband three percent of significant government contracts until the contractors demonstrate compliance with the tax code.
Altogether, the withholding requirement saves the government billions of dollars a year, so to pay for it, Republicans have paired it with a $30 billion rescission of unobligated funding for federal programs — meaning Democrats will oppose it overwhelmingly.
That means Republicans can argue that Democrats are obstructing pieces of Obama’s jobs bill and thwarting bipartisanship. But in addition to the partisan pay for, the other problem is that repealing the withholding law wouldn’t do much for growth and would have significant, negative policy ramifications.
“It’s just disturbing,” said Chuck Marr, a tax expert at the liberal-leaning Center on Budget and Policy Priorities. “This is a provision in the law put in two years ago to crack down on government contractors that cheat on their taxes.”
He said the economic impact of repeal would be “trivial” and send a dangerous message to contractors.
“There have been documented investigations by the GAO that have shown significant tax cheating by government contractors,” Marr said. “It’s a signal that the government’s softening up on tax compliance.”
Indeed, in 2007, the Government Accountability Office found that just hover 63,000 defense and non-defense contractors owed the government nearly $8 billion. And the Joint Committee on Taxation determined it would cost the Treasury $11.2 billion over 10 years.
Obama included the measure in part to attract Republican support for the whole bill — now they’re using it as a political weapon against the rest of the package.