Reducing Withholding Burdens—But How do you “Pay” for it?
It withdraws a tax withholding rule—never implemented—that everyone agrees is too costly and burdensome on government contractors. It would force them to do huge amounts of paperwork, just to squeeze a small amount of tax compliance out of them. But lightening that burden will allow some non-compliance and reduce badly needed revenues.
This is no time to be throwing the government’s books even further out of balance, so the House and Senate have to go looking for ways to “pay for” the repeal of this rule. They must lower spending or raise money elsewhere to make up for the lost income to the government. Says “Floor Action”:
[House] members voted to adjust a calculation for Medicaid eligibility that even the White House approved. But Senate Democrats have indicated they don’t like that “pay for,” and instead may be looking at raising taxes on corporate jet owners. Senate Majority Leader Harry Reid (D-Nev.) may also have an interest in maintaining a piece of the tax rule for companies with a history of evading taxes.
By lowering spending and revenues, leaving more money with the private sector, the House’s version “saves” about $150 per U.S. family. It doesn’t lower spending as far as it lowers taxes, though, so it increases the national debt by about $40. A cost estimate for the Senate version is not yet available.
The House and Senate must pass the same bill before it is ready for the president, of course. It could be that differences between the spend-less House and the tax-more Senate may yet block this bill from becoming law.
How should this be resolved? You can weigh in here, or in the comments on the bill’s page. The current vote on H.R. 674 is below. Click to vote, comment, learn more, or edit the wiki article on the bill.