About that ‘withholding rule’

The House Republicans’ jobs plan is primarily focused on eliminating various federal safeguards, such as limits on how many toxins incinerator operators can burn into the atmosphere. But deregulation isn’t the only thing on the GOP’s mind; the same agenda touches on — what else? — taxes.

From the economic plan House Majority Leader Eric Cantor (R-Va.) circulated yesterday:

3% Withholding Rule Repeal:

Beginning in 2013, federal, state, and local governments will be required to withhold three percent of all government payments made to contractors in excess of $100 million. While the law has been delayed multiple times, its effect once implemented will be massive — causing accounting burdens on governments and potentially harmful cash flow disruptions for contractors and subcontractors across all sectors. Therefore, we will move quickly this fall to repeal this burdensome requirement and relieve construction contractors, medical providers, manufacturers, farmers, and many others providing goods and services under government contracts of the uncertainty the impending law is creating.

Cantor has been talking about this quite a bit lately. As he sees it, the withholding rule “serves as an unnecessary tax increase on those who do business with the government.”

This may seem like inconsequential policy trivia, but given that it’s one of the tax policies Cantor seems to care about most, let’s take a moment to set the record straight.

Who came up with this “burdensome” withholding rule? House Republicans did.

What Cantor calls “an unnecessary tax increase” was actually created by the House GOP in 2005 as a way of playing an accounting game. In effect, Republicans wanted to make it look like they were being fiscally responsible, and used this measure to give the appearance of generating revenue while cracking down on tax cheats. It was a provision in a larger bill called the Tax Increase Prevention and Reconciliation Act of 2005.

Who voted for this “unnecessary tax increase”? As it turns out, 98% of the House Republican caucus did — including Eric Cantor. His memo yesterday says implementation of the measure “has been delayed multiple times”; what the memo neglects to mention is the delays have occurred since the GOP approved the idea in the first place.

If Republicans are going to keep talking about this, the least they can do is explain why they approved the very idea they’re now so eager to eliminate. And while they’re at it, maybe the House GOP can also explain why a withholding rule that hasn’t been implemented is responsible for holding back job growth.