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House Repeals Law Withholding Contractors' Taxes

In a rare show of unity in a bitterly partisan year, the House voted overwhelmingly Thursday to repeal a law requiring federal, state and local governments to withhold 3 percent of what contractors are owed until they pay their taxes.

Federal investigators have found tens of thousands of contractors who owe billions of dollars to the U.S. government. The 5-year-old statute was designed to force scofflaws who perform government work to pay up.

That drive to crack down on tax cheats now ranks well behind a stronger political imperative -- lawmakers' desire to show voters they are trying to preserve jobs. The withholding requirement doesn't take effect until January 2013, meaning that scrapping it won't produce any new jobs. But members of both parties said repealing the law would remove impediments to future job creation.

"Now is the time to eliminate barriers that are standing in the way of jobs for American workers," said Rep. Wally Herger, R-Calif., a sponsor of the repeal legislation.

Lawmakers approved the legislation 405-16. It still needs Senate approval.

House Democrats voiced support for the legislation but faulted Republicans for blocking other efforts to bolster the economy from President Barack Obama. He's proposed a $447 billion jobs bill that has made little progress in Congress.

"When the president brings up proposals to create jobs, they're thwarted by the majority here and Republicans in the Senate," said Rep. Sander Levin, D-Mich.

Obama supports scrapping the withholding law.

The government would lose an estimated $11 billion by repealing the law. But accompanying language approved by the House would make up for that loss by making it harder for hundreds of thousands of lower- and middle-income people to qualify for Medicaid under Obama's health care overhaul law.

It was approved 262-157 with solid support from Republicans who said the health care law was too generous in providing Medicaid assistance to too many people. Most Democrats opposed the Medicaid cut, saying those being denied the assistance needed it.