The tax was enacted in the Tax Increase Prevention and Reconciliation Act of 2005 and was set to take effect on January 1, 2013.
The vote was passed by a wide margin (405-16) and will now be sent to the Senate. The U.S. Chamber of Commerce and other business groups have said the withholding requirement is too burdensome and that its repeal is one of the few areas of agreement between the President and congressional Republicans, reports Bloomberg.
The Financial Services Institute (FSI) released a statement following the vote, applauding the House for passing the bill (H.R.674). The institute says the 3% Withholding Tax would have had a negative impact on financial advisers that do business with local, state or federal government entities. FSI President and CEO, Dale E. Brown, released the following statement:
“Businesses that provide services to the government deserve to be paid in full and due upon receipt. They shouldn’t be forced to lose a percentage of their pay they could be investing throughout the year or using to hire additional employees. The withholding tax could create cash flow problems as well as draining capital that could be used for job creation and business expansion. On behalf of our members and their clients, FSI weighed in with multiple letters, and we’re pleased to do our part in this effort. This is further effort on FSI’s behalf to support our members’ small businesses and the best interests of their clients.”