WH threatens veto of contractor tax repeal over offsets

Friday - 10/21/2011, 10:17am EDT

By Jack Moore
Federal News Radio

The White House is threatening to veto a bill repealing the 3 percent tax on government contractors because of how the bill would be paid for — $30 billion in agency spending cuts.

Last week, the House Ways and Means Committee approved a version of the bill repealing the tax. However, earlier this week, the Congressional Budget Office, which scores legislation, found repealing the tax would add more than $11 billion to the deficit over 10 years.

The Senate version of the bill, introduced this week by Minority Leader Mitch McConnell (R-Ky.), offset the cost of repeal by tying $30 billion in unspecified cuts to the measure.

But the White House said those cuts are too steep.

The administration supports the intent of the tax repeal, according to a statement of administration policy. Repealing the tax would lift a burden on contractors, improve cash flow and help them create jobs, it said.

But the administration "strongly objects" to the $30 billion spending cut the Senate uses to offset the repeal.

"Cutting already-tight discretionary program levels even further ... would be a serious mistake," the statement reads, and "would cause serious disruption in a range of services supported by the federal government."

According to the statement, the administration said it would work with Congress to find "acceptable offsets" to pay for the tax repeal and pointed to the president's deficit-reduction plans as a start.

The veto talk is still just a threat at this point. Democrats blocked the measure from even coming to a vote Thursday, the Associated Press reported, after Republicans in the chamber voted down many of the president's jobs proposals. The House will likely vote — and pass — its version of the repeal next week, AP reported.

The 3 percent tax on contractor payments became law in 2006 but is not set to go into effect until 2013. It's grown increasingly unpopular of late, with lawmakers from both sides of the aisle supporting repeal.