[Congressional Record Volume 157, Number 162 (Wednesday, October 26, 2011)]
[House]
[Page H7075]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                REPEALING THE 3 PERCENT WITHHOLDING TAX

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
Virginia (Mr. Connolly) for 5 minutes.
  Mr. CONNOLLY of Virginia. Mr. Speaker, there are 14 million Americans 
out of work. They need jobs. This economy needs jobs. Unfortunately, 
jobs have not been a focus for the House Republican leadership thus 
far. While private sector job growth has dwindled, House Republicans 
have repeatedly placed partisanship above policy. It's long past time 
we vote on a jobs bill.
  The President's American Jobs Act contains a number of important jobs 
initiatives which have traditionally enjoyed bipartisan support: tax 
cuts for businesses, tax cuts for workers, tax cuts to employ veterans, 
and investments in critically needed infrastructure in this country. 
Unfortunately, the Senate Republicans voted to kill this job creator 
and the House Republican leadership hasn't even brought it up for 
debate.
  Today, however, we have a small opportunity to help small businesses 
and provide them with greater predictability by repealing the 
burdensome 3 percent withholding requirement on government contractors, 
vendors, farmers, and Medicare providers. The President has called for 
its repeal, and this is a bipartisan bill supported by many of us on 
both sides of the aisle.
  The 3 percent withholding regulation became law under President Bush 
in 2005 in a Republican Congress. The original intent may have been to 
ensure tax compliance among a very small number of bad actors, yet the 
sledgehammer approach that was adopted is creating far more challenges 
than the problems we're trying to solve. Since then, a number of 
bipartisan efforts have delayed its implementation, but temporary 
measures, at best, leave businesses uncertain and wary about future 
investment.
  My district here in the National Capital region is probably home to 
more Federal contractors than any other in Congress, and I routinely 
hear from them about this issue everywhere I go. They report that the 3 
percent withholding will unduly restrict their cash flows, increase 
project bond costs, and imperil their ability to expand and create 
jobs.
  In addition, this burdensome regulation won't just harm the private 
sector. It actually hurts State and local governments that contract 
with private companies subject to the withholding requirement. I know 
from my experience as chairman of the Fairfax County Board of 
Supervisors that this regulation would create an accounting nightmare 
for our local and State partners. An estimated 20 percent of counties 
throughout the country have more than $100 million in annual 
expenditures that would be subject to this withholding. As county 
chairman of such a jurisdiction, I worked diligently with an open RFP 
process to ensure the lowest cost and value for our taxpayers.
  This will be an administrative nightmare for State and local 
governments, which would be forced to undergo the collection and 
forwarding of the unnecessary withholding to the IRS. The cost to the 
Department of Defense to be compliant with this regulation is they 
would have to withhold more than $17 billion from private companies 
every year.
  Furthermore, many businesses subject to the requirement would either 
have to increase their business or stop bidding on projects with local 
governments. Either way, whether competition is limited or prices are 
increased, counties would be forced to pay higher costs to vendors, 
further burdening local taxpayers at a time they can't afford it. We 
need to partner with the private sector to spur economic growth and 
recovery from this recession. This regulation would serve only as a 
roadblock to that effort.
  The Government Withholding Relief Coalition represents more than 140 
trade associations, State and local governments, and stated that the 
total cost of the 3 percent regulation would be $75 billion over the 
next 5 years. Repealing it today will provide businesses with greater 
predictability and remove undue government intrusion into their 
operations. With greater predictability, America's businesses will be 
better able to invest in job creation. We can provide that 
predictability today.
  I urge my colleagues to vote to support small businesses and vote for 
H.R. 674.

                          ____________________