U.S. Chamber of Commerce - H.R. 674 to Repeal the 3% Withholding Tax

TO THE MEMBERS OF THE UNITED HOUSE OF REPRESENTATIVES:

The U.S. Chamber of Commerce, the world’s largest business federation representing the interests of more than three million members and organizations of every size, sector, and region, strongly urges you to support H.R. 674 as amended, which would fully repeal the burdensome 3% Withholding Tax mandate enacted in Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222).

H.R. 674 was approved with overwhelming bipartisan support in the U.S. Senate last week. The Senate passed bill adds language to make a technical clarification regarding the existing federal levy program in order to conform to congressional intent and directly address tax delinquency. H.R. 674 originally passed in the U.S. House of Representatives by a vote of 405 to 16 and is supported by the Administration. Given the substantial bipartisan, bicameral support for repealing the 3% withholding tax mandate, the Chamber urges the House to expeditiously approve H.R. 674 as amended to give greater certainty to those impacted.

Unless repealed before it takes effect on January 1, 2013, the 3% Withholding Tax will have a dramatic, negative impact on millions of honest taxpaying businesses as well as state and local governments. Under this provision, the Internal Revenue Service (IRS) was given new broad sweeping authority to hold hostage 3% of nearly every transaction between the public and private sector—giving the federal government an interest free loan on the backs of many honest taxpayers. This mandate is also anti-stimulus in the sense that it removes money from local economies and sends it to the IRS.

Additionally, the profit margin for many businesses is often less than 3%, meaning that the withholding tax will create significant cash flow problems for day-to-day operations as well as draining capital that could be used for job creation and business expansion. The 3% Withholding Tax will also drive opportunities away from small businesses as governments look to consolidate their purchasing with larger companies to make it less onerous to comply with the mandate. During these difficult economic times, Congress should be pursuing policies that encourage, not hamper, business growth and job creation in the private sector.

The U.S. Chamber of Commerce strongly supports H.R. 674 as amended, to fully repeal the 3% Withholding Tax, and urges you to approve this important legislation and send it to the President for his signature.

Sincerely,
R. Bruce Josten