[Congressional Record (Bound Edition), Volume 157 (2011), Part 11]
[Senate]
[Pages 16283-16284]
[From the U.S. Government Publishing Office, www.gpo.gov]




                   WITHHOLDING TAX RELIEF ACT OF 2011

  Ms. SNOWE. Mr. President, I rise to express support for the 
Republican leader's legislation on a critical issue that addresses the 
burdensome cost of compliance with the Tax Code. Senator McConnell's 
bill is modeled after bipartisan legislation Senator Brown and I 
introduced earlier this year which would repeal the 3 percent 
withholding on government contractors that was enacted in 2005 and 
which mandates that Federal, State, and local governments withhold 3 
percent of their payments to private contractors, including Medicare 
provider payments, farm payments, defense contracts and certain grants.
  I am deeply disappointed by the fact that the bill received 57 votes 
on the floor on October 20 but failed to pass the 60-vote threshold. 
The onerous withholding mandate on government contracts therefore 
remains before us and must be repealed. The House of Representatives 
has spoken quite clearly by passing repeal legislation last week by a 
vote of 405-16 and it is time for the Senate to do the same!
  This issue originated as a result of very legitimate efforts to 
address the tax gap--the difference between what is owed in taxes and 
the amount that the IRS is able to collect. I believe everyone agrees 
that Americans should pay their taxes in full and none of us supports 
tax cheats, yet the issue that Senator McConnell's legislation 
addresses arises from the means of mandating compliance with the Tax 
Code, the cost of that compliance compared to the revenue collected, 
and impact on hiring. The unfortunate fact is that the 3 percent 
withholding provision will cost far more to implement than will be 
collected in tax revenue. More importantly, our economy will suffer as 
this provision would take a significant toll on jobs and growth.
  According to the Bureau of Labor Statistics, the average annual 
unemployment rate for 2010 was 9.6 percent. For 27 out of the past 32 
months the unemployment rate has been at 9 percent or above. About 45 
percent of the unemployed have been out of work for at least 6 months--
a level previously unseen in the six decades since World War II. At a 
time when 14 million Americans are still unemployed, and have been so 
for the longest period since record keeping begun in 1948, our 
government should be taking every possible step to ease the burden on 
job creators. We need to offer the American people solutions that help 
to grow jobs, not provisions that prevent it!
  Compliance with this law will impose billions of dollars of cost on 
both the public and private sectors, with a disproportionate impact on 
small businesses. These compliance costs will far exceed projected tax 
collections. For instance, just one Federal agency, the Department of 
Defense, estimated that it would cost over $17 billion in the first 5 
years to comply, and the revenue estimate in 2005 projected that only 
$6.977 billion would be collected over a 10-year window. Even if that 
DOD estimate is inflated, as some charge, the Congressional Budget 
Office projects costs of $12 billion just to implement this provision 
at the Federal level. There are similar costs imposed across all of the 
Nation's State

[[Page 16284]]

and local governments, making this provision simply an unfunded mandate 
on State and local governments. This is a case of spending a dollar to 
collect a dime, which is counterproductive for addressing the Nation's 
deficits.
  What is worse is that this provision is not going to impact only 
those who have skirted tax laws--this provision will fall most heavily 
on innocent parties who have done nothing wrong at all, jeopardizing 
their cash flow and ability to grow. As ranking member of the Senate 
Committee on Small Business, I have heard from many businesses across 
the country that the 3 percent withholding amount will exceed their 
profit on a given contract and will prevent them from being able to 
make payroll, forcing them to borrow from banks just to pay their 
employees. This is not the way to encourage jobs and business growth 
but rather way to stifle it.
  This 3 percent withholding provision would increase the tax and 
regulatory burdens on our businesses, precisely the wrong policy potion 
for these troubled times. We have the opportunity now to repeal this 
provision and we need to take that step to help the jobs picture. It is 
vital to note that it is not just workers who would suffer under this 
provision but Medicare recipients as well. Maine has the oldest 
population in the Nation and I know all too well how fragile are the 
finances of our seniors who depend on this vital program. This 
provision would deduct 3 percent from payments to Medicare providers 
and instead send the cash to the IRS. Why would we want to give these 
precious dollars to the tax man rather than doctors? This new problem 
would give doctors one more reason to turn away Medicare patients. And 
that is to say nothing of the cost to CMS of setting up the accounting 
systems that would implement this withholding scheme.
  In the American Recovery and Reinvestment Act, ARRA, Congress delayed 
for 1 year the implementation of this mandate in recognition of the 
exorbitant expenditures that will be necessary to implement accounting 
systems and hire new compliance employees at a time when the those 
resources were desperately needed for productive uses. The IRS itself 
recently recognized the enormous burdens that this provision will put 
on government agencies and as a result issued an administrative delay, 
meaning the 3 percent withholding provision now becomes effective after 
2012. And even the President, in his recent Jobs Act proposal, called 
for further delay of any implementation of this provision. If the 
Congress, the IRS, and this administration all recognize that the costs 
of this provision outweigh the benefits, then it is time to act to 
repeal it.
  As a result of the IRS regulatory delay, this provision goes into 
effect at the end of 2012, but people and businesses already are 
expending valuable resources in anticipation of having to comply with 
this pernicious provision. At a time when the American people are 
extremely frustrated with the partisan gridlock and Congress inability 
to pass meaningful legislation, we had an opportunity to pass a 
bipartisan bill that would provide small businesses with much needed 
certainty and relief. The Senate failed to grasp that opportunity on 
October 20 but we cannot stop fighting to defend small businesses from 
its implementation. We must act soon, and we must act completely, to 
end the three percent withholding provision entirely. I urge my 
colleagues to support this legislation.

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