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House members on November 16 approved, by a 422-to-0 margin, legislation (HR 674) repealing the 3-percent withholding tax imposed on federal contractors while providing tax credits for employers who hire military veterans. The measure is the first portion of President Obama's failed jobs package to receive full bipartisan support in both the House and Senate.
The estimated $11.2-billion cost of repealing the withholding tax is offset by changing the calculation of modified adjusted gross income in determining eligibility for some health care credits, including Medicaid, and the Children's Health Insurance Program. The 3-percent withholding tax was imposed six years ago on federal contractors to crack down on tax avoidance as part of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222).
The $1.6-billion cost of the veterans' hiring provisions is offset by delaying scheduled fee reductions on mortgage applications for loans guaranteed by the Department of Veterans Affairs. The bill offers a tax credit of up to $5,600 for hiring veterans who have been looking for a job for more than six months, as well as a $2,400 credit for veterans who are unemployed for more than four weeks, but less than six months. The measure also calls for a tax credit of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months.
The Senate unanimously approved HR 674 on November 10 after Senate Majority Leader Harry Reid, D-Nev., added the VOW to Hire Heroes Bill of 2011 as an amendment (TAXDAY, 2011/11/11, C.1). The House had initially approved legislation repealing the 3-percent withholding tax on October 27 but the Senate amendment required the lower chamber to hold another vote. President Obama has stated his support for the measure.
Written by Jeff Carlson, CCH News Staff | 
