U.S. Chamber Applauds House Passage of Bill to Repeal 3% Withholding Mandate; Urges Senate to Follow Suit

WASHINGTON, D.C.—The U.S. Chamber of Commerce today applauded the House of Representatives for passing legislation to repeal the burdensome 3% withholding tax mandate, and urged the Senate to quickly follow suit.

“Today the House of Representatives proved that members on both sides of the aisle can come together to improve our economy,” said Bruce Josten, executive vice president for Government Affairs. “The bipartisan repeal of the 3% withholding tax is an important step to removing one of the onerous government burdens on job creators that have hampered our economic recovery. With the Administration's support, and the strong bipartisan vote in the House, it is our hope that the U.S. Senate will take up this legislation, put politics aside, and pass the 3% repeal once and for all.”

Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 is a sweeping requirement which mandates that the federal, state, and certain local governments withhold 3% of payments for goods and services. In addition to impacting transactions between businesses and the government, the 3% withholding tax will also be applied to Medicare payments and farm payments.

“The scope of this mandate extends far beyond just the business community—it’ll ensnare doctors, farmers, state and local governments, and colleges and universities in its net,” Josten stated. “With their budgets already strained, states and local governments will be fiscally challenged to pay for the added costs of administering this mandate and may be forced to make cuts in programs and services or raise taxes. Also caught in the path of this runaway mandate are physicians and the Medicare beneficiaries they serve. It’ll impact resources dedicated to building, repairing and maintaining our roads, bridges, ports, waterways, schools and hospitals as well.”

Unless Congress acts to repeal it, this far-reaching mandate will take effect on January 1, 2013.