Senate approves bill to kill controversial government-contractor tax

The Senate voted today to kill a tax on government contractors before it had a chance to go into effect. By a 95-0 tally, the Senate passed a measure that nixes a 3% withholding tax that would have been placed on vendors doing business with government at every level, beginning in 2013. The House approved a similar bill, 405-16, last month. The House will have to pass the Senate version because the Senate attached a veterans jobs bill. The revised legislation is expected to pass the House easily and be signed into law soon by President Barack Obama. “The effect of the repeal of the withholding requirement would be to avoid a decrease in cash flow to these contractors, which would allow them to retain these funds and use them to create jobs and pay suppliers,” the White House said in endorsing the bill before the Senate vote. Removing the 3% withholding would ensure immediate full payments to investment advisers assisting governments with employee retirement plans and other investments, according to the Financial Services Institute, which has been pushing the bill. It also would give clients who do government work more money to invest. The bill is being held up as a model of cooperation across the aisle during a time in which Democrats and Republicans usually are locked in partisan battles. “By coming together, we're going to do something the American people want — getting rid of stealth taxes,” Sen. Scott Brown, R-Mass., the sponsor of the bill, said on the Senate floor just before the vote.