Senate Moves to Repealing 3-Percent Rule

On November 7, the senate voted to take-up legislation that would repeal the 3-percent withholding tax imposed on federal contractors.  Senate Majority Leader Harry Reid plans to amend the bill with legislation that would provide tax credits for companies that hire veterans with service-connected disabilities.

The withholding tax repeal is estimated to cost $11.2 billion over 10 years, according to the Joint Committee on Taxation.  The House approved a measure that would offset the cost by changing the calculation of modified adjusted gross income in determining eligibility for some health care credits, including Medicaid, and the Children’s Health Insurance Program.  Reid said he would prefer a different pay-for but may change his mind if passage of the VOW to Hire Heroes Bill of 2011 is assured with the House offset.

The VOW to Hire Heroes Bill of 2011 proposes a tax credit of up to $5,600 for hiring veterans who have been looking for a job for more than six months, as well as a $2,400 credit for veterans who are unemployed for more than four weeks, but less than six months.  In addition, the measure calls for a tax credit of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months.  It also provides expanded training and education opportunities for all veterans.  Democrats have proposed paying the $1.6-billion cost of the legislations by delaying scheduled fee reductions on mortgage application for loans guaranteed by the Department of Veterans Affairs.

President Urges Passage

President Obama on November 7 appealed to members of Congress to pass tax credits for employers who hire unemployed veterans of the wars in Iraq and Afghanistan at a time when nearly three-million former service members are transitioning to civilian life.  “Our veterans did their jobs.  It’s time for Congress to do theirs,” Obama said at a Rose Garden event attended by former service members and representatives of veterans’ organizations that support the hiring incentives.  The president urged lawmakers to “put our veterans back to work, and pass this element of the jobs package that benefits our veterans and gives businesses an incentive to hire veterans.”