Analysis: Repeal of tax withholding law good news for both industry, government

Thursday - 10/27/2011, 4:24pm EDT

Alan Chvotkin, vice president, Professional Services Council

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The House repealed a law that would have withheld 3 percent of payments to federal contractors until they paid their taxes. The law was passed five years ago and would have taken effect in 2012.

The repeal is good news for both contractors and agencies alike, said Alan Chvotkin, vice president of the Professional Services Council, in an interview with In Depth with Francis Rose.

The law would have raised $11 billion in revenue over the next decade, according to Congress' Joint Committee on Taxation. But repeal has received bipartisan support because lawmakers view the money contractors keep as a potential job creator.

The repeal "not only keeps cash flow going to companies but avoids agencies having to spend millions of dollars to develop their own internal systems to comply with the withholding requirement," Chvotkin said.

The original intent of the law does not address a fundamental issue, which is, he said, "how do you make sure that contractors are paying their fair share of taxes?"