[Congressional Record (Bound Edition), Volume 157 (2011), Part 11]
[House]
[Pages 16224-16229]
[From the U.S. Government Publishing Office, www.gpo.gov]




               3% WITHHOLDING REPEAL AND JOB CREATION ACT

  Mr. CAMP. Mr. Speaker, pursuant to House Resolution 448, I call up 
the bill (H.R. 674) to amend the Internal Revenue Code of 1986 to 
repeal the imposition of 3 percent withholding on certain payments made 
to vendors by government entities, and ask for its immediate 
consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Womack). Pursuant to House Resolution 
448, the amendment printed in House Report 112-261 is adopted and the 
bill, as amended, is considered read.
  The text of the bill, as amended, is as follows:

                                H.R. 674

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``3% Withholding Repeal and 
     Job Creation Act''.

[[Page 16225]]



     SEC. 2. REPEAL OF IMPOSITION OF 3 PERCENT WITHHOLDING ON 
                   CERTAIN PAYMENTS MADE TO VENDORS BY GOVERNMENT 
                   ENTITIES.

       (a) In General.--Section 3402 of the Internal Revenue Code 
     of 1986 is amended by striking subsection (t).
       (b) Effective Date.--The amendment made by this section 
     shall apply to payments made after December 31, 2011.

  The SPEAKER pro tempore. The gentleman from Michigan (Mr. Camp) and 
the gentleman from Michigan (Mr. Levin) each will control 30 minutes.
  The Chair recognizes the gentleman from Michigan (Mr. Camp).


                             General Leave

  Mr. CAMP. Mr. Speaker, I ask unanimous consent that all Members have 
5 legislative days in which to revise and extend their remarks and to 
include extraneous material on H.R. 674.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Michigan?
  There was no objection.
  Mr. CAMP. Mr. Speaker, I yield myself such time as I may consume.
  I come to the floor today in strong support of H.R. 674 to repeal the 
onerous, job-killing 3 percent withholding law. While this legislation 
has 269 cosponsors, I'd like to acknowledge the leaders on the bill, 
Ways and Means Health Committee Chairman Wally Herger and our Democrat 
Ways and Means colleague Congressman Earl Blumenauer. In addition to 
these advocates, we also have 25 other members of the Ways and Means 
Committee supporting this legislation--a clear signal of the strong 
bipartisan support for repeal of this 3 percent withholding rule.
  Job creators know all too well that this provision, like many efforts 
to increase Federal revenue and tax compliance, is lined with 
paperwork, complexity and costs--all of the things that hinder, rather 
than help, promote a climate for job creation.
  By considering and passing this bipartisan bill, we will unlock new 
opportunities for hiring. Job creators have told us just that, and it's 
why this legislation has the support of a diverse coalition of more 
than 170 groups, including the Government Withholding Relief Coalition.
  Like those job creators, others recognize the need for repeal, 
including President Obama. In the statement of administration policy in 
support of H.R. 674, the administration noted that ``the effect of the 
repeal of the withholding requirement would be to avoid a decrease in 
cash flow to these contractors which would allow them to retain these 
funds and use them to create jobs and pay suppliers.'' Mr. Speaker, I 
couldn't agree more.
  Supporting the repeal of the 3 percent withholding law is a 
demonstration that Washington can work together. With a strong 
bipartisan vote, we can reduce the uncertainty facing America's job 
creators, and we can free up valuable resources businesses can use for 
hiring.
  I ask my colleagues to vote ``yes'' on H.R. 674 and urge the Senate 
to swiftly take up and pass this legislation.
  I ask unanimous consent that the gentleman from California (Mr. 
Herger) be designated to control the balance of my time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Michigan?
  There was no objection.
  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
Michigan (Mr. Levin).
  Mr. LEVIN. Mr. Speaker, I yield myself such time as I may consume.
  I rise in support of this bill. It should have happened earlier. I 
think most of us, if not all of us, agree that this provision should be 
repealed. It is not narrowly targeted, and it would indeed impose 
significant and costly burdens on Federal, State, and local 
governments. I think we should all remind ourselves it was passed some 
years ago; and it was, I think, misguided when it was enacted in 2006 
when we in the minority here did not control the Congress. Indeed, the 
Ways and Means Committee when we were in the majority approved a repeal 
of the provision in 2009, and the Congress ultimately delayed its 
effective date.
  I do want to comment on the title of this bill that refers to job 
creation, and it should be noted that this is really not going to 
address the need for creation of jobs in our country. We have been here 
now 10 months. There is still no effort by the majority here in the 
House to bring up any meaningful jobs legislation; and when the 
President brings up proposals to create jobs, they are thwarted by the 
majority here and by the Republicans in the Senate.
  So let's support this bill but not pretend that it will create jobs; 
and in this respect I refer to a recent statement by Mark Zandi, the 
chief economist for Moody's Analytics who said this about this bill: 
``I don't think it's meaningful in terms of jobs. It's more trying to 
clean up something that needs cleaning up.'' Indeed, this needs to be 
cleaned up. Therefore, we need to pass it.

                              {time}  0920

  Let me also comment on--and we'll talk about this later on the second 
bill--the pay-for. I went before the Rules Committee to ask that there 
be consideration of a different pay-for, what we'll be considering 
later. I just want everybody to understand the facts, and each can 
judge on his or her own how they'll vote. The impact of the pay-for 
that came through the Ways and Means Committee could cause up to 
500,000 individuals to lose health care coverage.
  I offered an amendment in the Rules Committee that would have offset 
the cost of a business tax provision by closing a loophole on the 
business side that's improperly enjoyed by oil and gas industry giants. 
Unfortunately, my amendment was ruled out of order. We'll talk about 
that later.
  We're now on this bill. I urge its support. Let's not pretend it's a 
job creation bill. Let's get busy here on bills that will indeed help 
to promote jobs in the private sector of the United States of America, 
as our President has proposed and he has pleaded that there be 
consideration by the House and the Senate, only to be responded to with 
deaf ears.
  I reserve the balance of my time.
  Mr. HERGER. Mr. Speaker, I yield myself such time as I may consume.
  I rise in strong support of H.R. 674, the 3% Withholding Repeal and 
Job Creation Act. The American people have repeatedly called on 
Congress to work together in a bipartisan way to encourage job 
creation. That's exactly what we're doing here today.
  H.R. 674 repeals a tax that requires government agencies at all 
levels--Federal, State, and local--to withhold 3 percent of all 
payments for goods and services beginning at the end of next year. This 
tax will affect everyone, from manufacturers to road builders to 
physicians who treat seniors on Medicare. Many of these businesses 
operate on margins of less than 3 percent, meaning that this provision 
will harm their cash flow and effectively force them to give the 
Federal Government a no-interest loan.
  Even though it doesn't go into effect for another year, the 3 percent 
withholding tax is holding back job creation right now. Coming from a 
small business background, I can attest that businesses look several 
years ahead when they're deciding how to invest.
  This week the Associated General Contractors of America released a 
survey finding that nearly half of all construction firms will be 
forced to hire fewer workers if the 3 percent withholding tax takes 
effect. As one AGC member put it, ``The way the economy is now, we are 
very lucky to make 3 percent profit. This could put us out of business, 
along with our 300-plus employees.''
  Now is the time to eliminate the barriers that are standing in the 
way of jobs for American workers. H.R. 674 has the support of 
businesses, State and local governments, and 269 bipartisan cosponsors 
in the House of Representatives, as well as the Obama administration.
  Mr. Speaker, I would like to enter into the Record a letter from the 
Government Holding Relief Coalition, signed by more than 150 
businesses, health care, education, and local government groups 
supporting passage of this legislation.
  With that, I reserve the balance of my time.


[[Page 16226]]


                                            Government Withholding


                                             Relief Coalition,

                                                 October 26, 2011.
       To the Members of the U.S. House of Representatives: The 
     Government Withholding Relief Coalition and its member 
     organizations strongly urge you to vote for H.R. 674, a 
     bipartisan bill to 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), when it is 
     considered on the House floor later this week.
       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, health care providers, farmers and 
     colleges and universities.
       For many businesses the profit margin for projects they 
     complete 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. This mandate is also 
     anti-stimulus in the sense that it removes money from local 
     economies and sends it to the IRS.
       The mandate is already proving costly and will increase 
     exponentially as the implementation deadline moves closer. If 
     this mandate is not repealed, it will cost companies and 
     governments at all levels substantial amounts of money just 
     to prepare to comply with this unnecessary and unfortunate 
     tax provision. These exorbitant expenditures will be at the 
     expense of hiring new employees, expanding businesses, and 
     providing government services at a time that neither the 
     public nor private sector can handle such unnecessary costs.
       In addition, we strongly support the view that those 
     receiving payments from the government should meet their 
     federal, state and local tax obligations. However, imposing 
     an onerous 3% Withholding Tax on transactions between 
     government and honest taxpaying businesses is not the answer.
       The Government Withholding Relief Coalition, which 
     represents all sectors of the economy, believes it is 
     imperative that the 3% Withholding Tax be repealed as soon as 
     possible to limit the damaging impacts to our economy. We 
     appreciate the bicameral, bipartisan support of efforts to 
     repeal it and strongly encourage you to vote for H.R. 674.
           Sincerely,
       Government Withholding Relief Coalition:

       Aeronautical Repair Station Association; Aerospace 
     Industries Association; Air Conditioning Contractors of 
     America; Air Transport Association; Airports Council 
     International-North America; America's Health Insurance 
     Plans; American Ambulance Association; American Bankers 
     Association; American Bus Association; American Clinical 
     Laboratory Association; American Concrete Pressure Pipe 
     Association; American Congress on Surveying and Mapping; 
     American Council of Engineering Companies; American Dental 
     Association; American Farm Bureau Federation; American Gas 
     Association; American Heath Care Association; American 
     Institute of Architects; American Institute of Certified 
     Public Accountants; American Logistics Association.
       American Medical Association; American Moving and Storage 
     Association; American Nursery and Landscape Association; 
     American Road & Transportation Builders Association; American 
     Society of Civil Engineers; American Society of Landscape 
     Architects; American Subcontractors Association; American 
     Supply Association; American Traffic Safety Services 
     Association; American Trucking Associations; Armed Forces 
     Marketing Council; Associated Builders and Contractors; 
     Associated Equipment Distributors; Associated General 
     Contractors of America; Association of Management Consulting 
     Firms; Association of National Account Executives; 
     Association of School Business Officials International; 
     Baltimore Washington Corridor Chamber; Biotechnology Industry 
     Association; Business and Institutional Furniture 
     Manufacturers Association.
       CTIA-The Wireless AssociationTM; California 
     Association of Public Purchasing Officers; Coalition for 
     Government Procurement; Colorado Motor Carriers Association; 
     Computing Technology Industry Association; Construction CPAs/
     Consultants Association (CICPAC); Construction Contractors 
     Association; Construction Employers' Association of 
     California; Construction Financial Management Association; 
     Construction Industry Round Table; Construction Management 
     Association of America; Design Professionals Coalition; 
     Edison Electric Institute; Electronic Security Association; 
     Engineering & Utility Contractors Association; Federation of 
     American Hospitals; Financial Executives International; 
     Financial Services Institute; Finishing Contractors 
     Association; Gold Coast Hispanic Chamber of Commerce.
       Government Finance Officers Association; Hawaii 
     Transportation Association; Heating, Airconditioning & 
     Refrigeration Distributors International; IPC--Association 
     Connecting Electronics Industries; Independent Electrical 
     Contractors, Inc; International City/County Management 
     Association; International Council of Employers of 
     Bricklayers and Allied Craftworkers; International 
     Foodservice Distributors Association; International Municipal 
     Lawyers Association; Large Public Power Council; Management 
     Association for Private Photogrammetric Surveyors; Mason 
     Contractors Association of America; Mechanical Contractors 
     Association of America; Medical Group Management Association; 
     Messenger Courier Association of the Americas; Miami Dade 
     County; Mississippi Trucking Association; Modular Building 
     Institute; Motor Transport Association of Connecticut; 
     Munitions Industrial Base Task Force.
       National Asphalt Pavement Association; National Association 
     for Self-Employed; National Association of College & 
     University Business Officers; National Association of 
     Counties; National Association of Credit Management; National 
     Association of Educational Procurement; National Association 
     of Energy Services Companies; National Association of 
     Government Contractors; National Association of 
     Manufacturers; National Association of Minority Contractors; 
     National Association of State Auditors, Comptrollers and 
     Treasurers; National Association of State Chief Information 
     Officers; National Association of State Procurement 
     Officials; National Association of Surety Bond Producers; 
     National Association of Water Companies; National Association 
     of Wholesaler-Distributors; National Beer Wholesalers 
     Association; National Corn Growers Association; National 
     Council for Public Procurement and Contracting; National 
     Defense Industrial Association.
        National Electrical Contractors Association; National 
     Electrical Manufacturers Association; National Emergency 
     Equipment Dealers Association; National Federation of 
     Independent Business; National Institute of Governmental 
     Purchasing; National Italian-American Business Association; 
     National League of Cities; National Mining Association; 
     National Office Products Alliance; National Precast Concrete 
     Association; National Propane Gas Association; National 
     Office Products Alliance; National Railroad Construction & 
     Maintenance Association; National Ready Mixed Concrete 
     Association; National Roofing Contractors Association; 
     National School Transportation Association; National Small 
     Business Association; National Society of Professional 
     Engineers; National Society of Professional Surveyors; 
     National Utility Contractors Association.
       National Wooden Pallet and Container Association; New 
     Jersey Chamber of Commerce; North-American Association of 
     Uniform Manufacturers & Distributors; North Coast Builders 
     Exchange; Office Furniture Dealers Alliance; Oregon Trucking 
     Association; Owner Operator Independent Drivers Association; 
     Petroleum Marketers Association of America; Plumbing-Heating-
     Cooling Contractors--National Association; Printing 
     Industries of America; Professional Services Council; 
     Regional Legislative Alliance of Ventura and Santa Barbara 
     Counties; Retail Energy Supply Association; Santa Rosa 
     Chamber of Commerce; Security Industry Association; Service 
     Disabled Veteran Owned Small Business Council; Sheet Metal 
     and Air Conditioning Contractors National Association, Inc.; 
     Shipbuilders Council of America; Small Business & 
     Entrepreneurship Council.
       Small Business Legislative Council; South Carolina Trucking 
     Association TechAmerica; Textile Rental Services Association 
     of America; The Association of Union Constructors; The 
     Distilled Spirits Council of the U.S.; The Financial Services 
     Roundtable; U.S. Chamber of Commerce; U.S. Conference of 
     Mayors; United States Telecom Association; Veterans Business 
     Institute; Veterans Entrepreneurship Task Force; Water and 
     Wastewater Equipment Manufacturers Association; Women 
     Construction Owners & Executives; Women Impacting Public 
     Policy.

  Mr. LEVIN. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Oregon (Mr. Blumenauer), who is a lead sponsor of this 
bill.
  Mr. BLUMENAUER. I appreciate your courtesy, Mr. Levin, as I 
appreciate the opportunity to work with my friend, Mr. Herger, on 
moving this bill forward.
  It was only a couple of months ago that we were having a press 
conference in the Triangle with a bipartisan group of Members of 
Congress, representatives from some of the coalition members that my 
friend Mr. Herger referenced, to be able to focus on the need to repeal 
this provision.
  Mr. Speaker, I think it is important to mark this critical step 
today. It will pass on the floor of the House in a strong bipartisan 
vote, reaffirming the bipartisan cooperation that got us to this point. 
I think that this is an example of what potentially we could do because 
a number of the members of the coalition that Mr. Herger referenced and 
that he is entering into the Record are likewise people that have a 
vision about how Congress and the Federal

[[Page 16227]]

Government could help rebuild and renew America.
  The contractors, the engineers, and the architects that we have heard 
from would also like us to step up in a bipartisan manner to deal with 
that. There were references to people who are dealing with health care. 
We still face sort of a health care crisis in this country. We may be 
able to deal with much of it with the health care reform bill. But many 
of the provisions that are embedded in law now have their core as 
bipartisan ideas. And I hope the same bipartisan spirit could help us 
accelerate bipartisan reforms so that the American public benefits in 
the health arena as well.
  You're going to hear a little spirited exchange on the floor of the 
House about how we pay for this legislation because it has a CBO score 
that's attached to it that suggests that this will raise revenue. Well, 
I have two observations that I think are important to note dealing with 
the pay-for. First and foremost, the sad fact is that this bill 
actually would cost more to implement than it would ever raise for the 
Federal Government. But we have a quirk in our scoring rules where they 
credit revenue. They don't deal with the cost of compliance. And this 
complicated piece of legislation, were it ever enacted, would require 
the Department of Defense, the General Services Administration, and up 
and down the Federal Government to develop mechanisms to try to 
implement it. It wouldn't just cost contractors, hospitals, State, and 
local government. It would actually cost the Federal Government far 
more than we would collect. I think one estimate was for the Department 
of Defense it would be $17 billion, which would dwarf what would be 
collected.
  We need, Mr. Speaker, as we move forward, to do a better job of 
thinking about the scoring rules. It's not CBO's fault, but that's how 
we play the game. And I find it troubling.
  It also, I think, speaks volumes about how we operate in the 
legislative process. This was passed in 2005. It was kind of dropped in 
in sort of backroom negotiations. It was never part of regular order. 
There was no hearing before our Ways and Means Committee to talk about 
this because the elements that have been documented in our committee 
and on the floor about the unworkability of this would never have 
survived a regular legislative process.
  Well, I'm pleased that the Democratic side has at least tried first 
to delay and then to fix this. I'm pleased we have worked with Mr. 
Herger in a bipartisan fashion to bring this legislation forward. I 
think Mr. Camp and Mr. Levin are committed to regular order. We've been 
having, I think, some very productive discussions on major issues. I 
hope we can keep this commitment to regular order to be able to make 
sure we don't have something like this in the future that has massive 
unintended consequences.
  Mr. Speaker, this is an idea that never should have been advanced in 
this form. It's been a long road to try and correct it. Today, we're 
making an important step towards that correction, but I would add a 
note of caution. The same spirit of cooperation and focus that has 
gotten us to this point with what will be an overwhelming vote--I hope 
it's unanimous--we need to keep going so this isn't a casualty of the 
back-and-forth process between the House and the Senate. The Senate 
played a large role in giving us this in the first place. We need to 
make sure that it is not caught up in the larger dramas that occur 
around here, that we can keep our eye on the ball, and that we can fix 
it.

                              {time}  0930

  I do want to say just one brief word about the pay-for. As I say, 
it's illusory, because it would cost far more than we would ever 
collect, but we have to deal with the scoring rules as they are.
  There are two proposals: One would tighten some eligibility for the 
health care reform; the other would take away some unnecessary tax 
benefits to large oil companies that long ago ceased to have any impact 
on oil exploration or reducing price. But while I actually think that 
the pay-for from our side of the aisle dealing with the oil tax 
adjustment is superior, I think as a practical matter we are going to 
have to do both of these in the months ahead if we're going to deal 
with our budget problems, reducing expenditures.
  I am hopeful that we don't allow the debate over the pay-for to 
obscure the need to move forward. And as a practical matter, we have 
big challenges ahead to get our deficit under control. I think, 
frankly, that both of these are items that should be enacted into law, 
I think will be enacted into law. And while there will be a spirited 
discussion--and I respect the people on both sides, and I think that 
they will be making good points--I hope it doesn't get in the way of 
the big picture.
  In closing, I appreciate the gentleman from Michigan permitting me to 
speak on this, his leadership on this. I salute my friend, Mr. Herger. 
I hope we can mark this step today for what it is but keep our eye 
focused on how we deal with these larger issues going forward so we're 
not back in this situation in the future.
  Mr. HERGER. Mr. Speaker, I yield myself such time as I may consume.
  I want to thank my good friend from Oregon (Mr. Blumenauer) for his 
support as the lead cosponsor on the other side of the aisle.
  I would like to take a moment to read a few of the comments that the 
Ways and Means Committee received from businesses and organizations 
across the country demonstrating why repealing the 3 percent 
withholding tax is critical to laying a stable foundation for job 
creation.
  Buffalo Supply, Incorporated, in Boulder, Colorado, writes, ``We are 
a 28-year-old small business that sells high-value medical equipment at 
a low margin, with a very significant part of our sales going to the 
Federal, State, and local governments. The 3 percent withholding tax 
will exceed our company's tax liability, which will destroy cash flow 
and ultimately hinder our ability to grow the business and add new 
employees.''
  Ian Frost, principal and founder of EEE Consulting in Virginia, says, 
``If enacted, the rule would mean the withholding of approximately 
$130,000 of revenue, using our projected 2011 revenue. This 3 percent 
withholding would essentially be a loan to the government for the year 
until our taxes are filed. Worse still, it might require our company to 
secure a loan to help us cover operating expenses at a time when cash 
in the bank is limited. The withholding could limit our ability to make 
payroll each month and limit our use of profits to give bonuses to our 
employees, expand our business, and hire new employees. A $130,000 
withholding each year would deplete our cash reserves by about 30 
percent.''
  The University of Illinois notes, ``This will add expenses at a time 
when our university, like many others around the country, is facing 
reduced State support. We would have no choice but to pass these 
expenses on to our students, many of whom are also struggling to make 
ends meet.''
  The American Medical Association states, ``In repealing the 3 percent 
withholding provision altogether, H.R. 674 will help Medicare 
beneficiaries maintain access to care, while assisting government 
agencies, physicians, and other health care providers avoid substantial 
implementation costs that will outweigh the benefits.''
  And I'd like to add that, at a time when many of us are concerned 
about fixing the SGR that threatens massive cuts to physicians 
participating in Medicare and a loss of access to physician services 
for many seniors, the last thing we want to do is add yet another 
potential cut to physicians' payments.
  Again, these are just a few of the dozens--or hundreds--of letters 
and testimonials the committee received from businesses across the 
country. We need to pass H.R. 674 and repeal this harmful tax today.
  I reserve the balance of my time.
  Mr. LEVIN. Mr. Speaker, I yield such time as he may consume to a most 
active member of our committee, the gentleman from New Jersey (Mr. 
Pascrell).
  Mr. PASCRELL. Good morning.
  I come to the floor today in support of H.R. 674, which will repeal a 
burden

[[Page 16228]]

on government contractors, particularly small businesses.
  I opposed the enactment of the 3 percent withholding when a 
Republican Congress and a Republican administration enacted it because 
I knew that it would hurt the economic engines of our economy.
  The repeal of this requirement will free up small businesses' cash 
flow, increasing their ability to add jobs and bid on new projects. 
This is only a very small part of a jobs plan that could help to reduce 
unemployment and wage stagnation.
  The majority has not allowed a vote on known job-creating measures 
such as the infrastructure bank or funding for our first responders and 
teachers, so I would imagine that that's not very important, those 
items. Rather, the majority has decided to promote their ``False 
Fifteen'' bills that attack clean air, safe water, and consumer safety. 
Be prepared, America, to eat poison.
  Not only do independent economists state that these bills do not 
create jobs, a recent report found that the so-called ``economically 
stifling'' regulatory atmosphere is not as bad as they say. The report 
says this: ``Obama's White House has approved fewer regulations than 
George W. Bush at this same point in their tenures, and the costs of 
those rules haven't reached the annual peak set in fiscal 1992 under 
President Bush's father,'' President Bush I. You would never think that 
by listening to the propaganda on the other side of the aisle. We've 
overregulated--supposedly--and we've caused businesses to spend so much 
money on these regulations. But again, when we look at the facts, this 
is not true.
  Eat your words. Even former Reagan Treasury official Bruce Bartlett 
quoted the Wall Street Journal saying, ``The main reason U.S. companies 
are reluctant to step up hiring is scant demand, rather than 
uncertainty over government policies.'' So you can grow as many horns 
as you want onto the President. Once again, look at the facts and the 
statistics: more regulations at this point when former President Bush 
was the President, Bush II.
  It is ironic that the majority is adjusting health reform to pay for 
this legislation. You condemn the health act, and then you take the 
money from the health act to pay for this legislation. That is a Ponzi 
scheme if I've ever heard one. The majority already voted to repeal 
health reform, yet to pay for this legislation--which is a separate 
piece of legislation--health reform must be in place for 10 years. How 
do you do that? They get rid of the health care act--well, they're 
trying to anyway--and yet they use every dime for the first 10 years to 
pay for the bill.

                              {time}  0940

  How do you do that? I'm anxious to see how you do this.
  Just as their 2012 budget was paid for by health reform savings, and 
we've discussed this in the budget committee, this bill is again paid 
for by the health reform which they want to annihilate. If the majority 
is against the health reform bill, perhaps they should stop making 
their agenda so dependent upon it.
  While I support H.R. 674, we cannot pat ourselves on the back and 
claim victory that this is a victory for jobs. Congress must do much 
more.
  Mr. HERGER. Mr. Speaker, I yield 2 minutes to the gentleman from 
Minnesota (Mr. Paulsen), a distinguished member of the Ways and Means 
Committee.
  Mr. PAULSEN. I thank the gentleman for yielding.
  Mr. Speaker, I also rise in favor of H.R. 674, a bill that will 
repeal this ill-conceived 3 percent withholding rule for all government 
contractors, including private hospitals that accept Medicare or 
Medicaid payments and those who provide even lunches for schools.
  This is one area in which Republicans and Democrats are working 
together, as even President Obama singled out this provision as 
burdensome to our Nation's job creators. The President, in his jobs 
plan, he proposed delaying this rule. The very fact that this rule 
continues to be delayed and has not been implemented since being first 
created in 2005 just tells you how bad of an idea it truly is. But we 
shouldn't just delay it; we should eliminate it and repeal it 
immediately.
  I've spoken with many small businesses in my district that will be 
negatively impacted by this law because the profit margin for many of 
these companies that have government contracts is right around 3 
percent.
  One Minnesota company, Valley Paving, says that withholding 3 
percent, the new 3 percent withholding law would be catastrophic on 
their balance sheet, meaning that covering costs, paying bills, and 
just covering operating costs would be a challenge. And as they point 
out, during these hard economic times, withholding more money from our 
small businesses like themselves would be that they most likely would 
not be able to update their equipment, not grow as fast, and not be 
able to hire more people.
  Mr. Speaker, this goes against everything that Washington should be 
doing, giving our employers certainty to create more jobs. This law 
needs to be repealed.
  Another contractor in my district, Hardrives, Incorporated, pointed 
out the Federal Government does not need to be playing banker with our 
earned income.
  This law may have sounded like a good idea on paper but, in practice, 
it will be disastrous. This is made evident by the cost of the program 
itself. Implementing it for the Department of Defense alone is 
estimated to cost about $17 billion over 5 years.
  And here's the irony, Mr. Speaker. The program is forecast to bring 
in a little over $11 billion across the whole spectrum of government. 
So the program is going to cost more to implement than it will take in.
  I strongly urge support of this commonsense approach and bipartisan 
approach on adopting this bill. The President supports the pay-for.
  I thank the member of the Ways and Means Committee, Mr. Herger, and I 
ask for its support.
  Mr. HERGER. Mr. Speaker, I advise the gentleman from Michigan that I 
am prepared to close.
  Mr. LEVIN. In closing, I support this legislation. It should not have 
been passed in the first place. It was not vetted effectively by the 
then majority. It's time. We tried before. It's time to now support 
this bill.
  I yield back the balance of my time.
  Mr. HERGER. Mr. Speaker, I yield myself such time as I may consume.
  I would like to reference the Statement of Administration Policy on 
this bill. In this letter from the President, just to quote from it, 
``The Administration supports passage of H.R. 674, which would repeal a 
3 percent withholding on certain payments made to private contractors 
by Federal, State, and local government entities.''
  ``The effect of the repeal of the withholding requirement would be to 
avoid a decrease in cash flow to these contractors, which would allow 
them to retain these funds and use them to create jobs and pay 
suppliers.''
  Mr. Speaker, jobs are the number one priority of the American people, 
and jobs should be the number one priority of this Congress. Many 
initiatives that are billed as ``creating jobs'' are controversial. 
This is not. We're repealing a tax that hurts small businesses and that 
will cost the government more to implement than it collects. This is a 
win-win-win for businesses, workers, local public services, and 
taxpayers.
  I urge all Members to vote to repeal the 3 percent withholding tax 
and create new jobs now.
  With that, I yield back the balance of my time.

         Executive Office of the President, Office of Management 
           and Budget,
                                 Washington, DC, October 25, 2011.

                   Statement of Administration Policy


H.R. 674--Repeal of the Three Percent Withholding on Government Vendors 
                (Rep. Herger, R-CA, and 269 cosponsors)

       The Administration supports passage of H.R. 674, which 
     would repeal a three percent withholding on certain payments 
     made to private contractors by Federal, State, and local 
     government entities.
       The repeal of the withholding requirement in H.R. 674 would 
     reduce a burden on government contractors who otherwise 
     comply with their tax obligations, particularly small 
     businesses. As evidenced in the President's

[[Page 16229]]

      proposed American Jobs Act, released September 12, 2011, the 
     Administration has supported alleviating this burden, which 
     was originally enacted into law on May 17, 2006. The 
     Administration also believes it is important to ensure that 
     Federal contractors are compliant with tax laws and supports 
     more targeted efforts that prevent persons with outstanding 
     tax debts from receiving Federal contracts. The effect of the 
     repeal of the withholding requirement would be to avoid a 
     decrease in cash flow to these contractors, which would allow 
     them to retain these funds and use them to create jobs and 
     pay suppliers. This would complement the Administration's 
     other efforts to help small businesses. Repeal of the 
     withholding requirement would also reduce implementation 
     costs borne by Federal and other governmental agencies. The 
     Administration would be willing to work with the Congress to 
     identify acceptable offsets for the budgetary costs 
     associated with the repeal, which could include but are not 
     limited to ones that are in the President's detailed 
     blueprint outlined to the Congress on September 19, 2011.

  Mr. JOHNSON of Illinois. Mr. Speaker, H.R. 674 is an extremely 
crucial piece of legislation that will permanently repeal the 3 percent 
withholding requirement on all government contracts. Once before, the 
tax's implementation date had been extended. H.R. 674 will remove any 
uncertainty from contractors that this tax would eventually be placed 
upon them.
  During these difficult economic times, this extra tax would limit 
access to capital, increase operating expenses, and take money out of 
local economies fortunate enough to have contracts to build 
infrastructure. That means, not only would businesses be burdened, but 
whole communities as well, because these local contractors would not be 
able to hire more local workers. As a result, infrastructure projects 
would slow, further burdening businesses, communities, and citizens 
that rely on infrastructure for transportation to work, running water 
for their families, and interstates to move goods and services.
  To further exemplify my support for H.R. 674, of which I am a 
cosponsor, prior to final passage, I will vote against the Motion to 
Recommit. This vote will drastically alter the bill and negate any 
positive affect this bill will have on the American economy.
  Mr. MARCHANT. Mr. Speaker, to my constituents in Texas, two things 
lay at the heart of this bill. The first is that the repeal of the 3 
percent withholding requirement removes unreasonable burdens on 
contractors doing business with federal, state, and local governments; 
the second is that it creates a more stable economic environment to 
conduct business, create jobs and get America moving in the right 
direction.
  The legislation before us repeals a requirement that may have been 
well-meaning but was ultimately misconceived. Whatever the original 
purposes of three percent requirement, the outcome would be disastrous.
  Much-needed capital would be kept out of the hands of cash-strapped 
businesses across the country. And local and state governments--facing 
historic budget pressures--would be saddled with even more additional 
administrative and compliance costs on basic goods and services.
  At a time when business investment is essential to revitalizing our 
economy, repealing the 3 percent withholding rule is the kind of 
federal action that aids economic growth and makes possible an increase 
in private consumption and demand. H.R. 674 is a thoughtful, 
commonsense, bipartisan bill that strengthens our economy, and I urge 
my colleagues to support this legislation.
  Mr. CONNOLLY of Virginia. Mr. Speaker, I am proud to be an original 
sponsor of this important bipartisan legislation, which will remove a 
sizable impediment to job creation in the private sector.
  Repealing this burdensome 3-percent withholding regulation will offer 
predictability and free up capital that employers have been holding in 
abeyance. Those dollars now can be used to create jobs, increase wages, 
or fund business investments that will benefit our local economies. 
That is why a diverse coalition of industry and government--including 
retailers, telecom, and local and state government associations--
strongly support this repeal.
  The federal government has a historic partnership with the private 
sector supporting research and innovation, which has led to job 
creation and economic growth. Allowing this ill-conceived regulation to 
go into effect would damage that partnership at the very time we need 
to be collaborating more with the private sector.
  This is one repeal that enjoys bipartisan support from the House and 
Senate, the President and the business community. I urge my colleagues 
to support it and to keep this private capital where it belongs--in the 
hands of our job creators.
  Mrs. MALONEY. Mr. Speaker, I rise in strong support of H.R. 674, a 
bill that repeals the Internal Revenue Code provision requiring 
federal, state, and local governments to withhold 3 percent on payments 
made to government contractors.
  This is an onerous requirement that I have been working with my 
bipartisan colleagues to repeal.
  I have heard from a number of government contractors who have told me 
that the problem for them include:
  Most construction contracts average less than 3 percent profit.
  Tightened cash flow will restrict bonding capacity.
  Enforcement of current laws would ensure tax obligations are met.
  The law places an undue burden on S Corps and joint ventures.
  It is widely believed that this is misguided public policy.
  I am pleased that we are working together to repeal this burden and 
help American businesses during tough economic times.
  The SPEAKER pro tempore. All time for debate has expired.
  Pursuant to House Resolution 448, the previous question is ordered on 
the bill, as amended.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.
  The SPEAKER pro tempore. Pursuant to clause 1(c) of rule XIX, further 
consideration of the bill is postponed.

                          ____________________