Key Vote letter on H.R. 674 to Repeal the 3% Withholding Tax

November 7, 2011

TO THE MEMBERS OF THE UNITED STATES SENATE:

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, a bill to 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).

This legislation was approved with overwhelming bipartisan support in the U.S. House of Representatives and is supported by the Obama Administration. Given the massive bipartisan support and the endorsement of the Administration, we call on the Senate to act as expeditiously as possible to approve H.R. 674, which would give certainty to those impacted—businesses, doctors, farmers, state and local governments and colleges and universities.

Unless repealed before it takes effect on January 1, 2013, the 3% Withholding Tax will have a dramatic, negative impact on millions of honest taxpaying businesses as well as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 dayto-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, and urges you to support this bipartisan measure to fully repeal the 3% Withholding Tax. The Chamber may consider votes on, or in relation to, this issue—including votes on amendments to H.R. 674, in our annual How They Voted scorecard.

Sincerely,
R. Bruce Josten