Article • Dean Baker’s Beat the Press
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The NYT did some mind reading to better serve its readers telling us that businesses “consider” a law requiring a 3 percent withholding on federal contracts to ensure tax compliance to be “burdensome.” The reason for this withholding is that many businesses cheat on their taxes. The government loses tens of billions of dollars a year to businesses who do not pay the income tax they owe.
Some people may be familiar with the requirement for withholding taxes, since they work for a living and employers are obligated under the law to have withholding. This requirement for government contractors is similar, except that it is almost certain to be lower than their actual tax liability.
However, the NYT told readers that businesses consider it burdensome to have to actually pay their taxes. It did not bother to tell readers why this withholding was there in the first place. In fact, the repeal of this provision can be viewed as a shameless pander to small businesses by politicians seeking their support in the next election.