Government Withholding Relief Coalition

TO THE MEMBERS OF THE UNITED STATES SENATE:

The Government Withholding Relief Coalition and its member organizations strongly support Amendment 405 to S. 782, authored by Senators Scott Brown and Olympia Snowe, which would repeal a sweeping new tax withholding requirement that is scheduled to take effect on January 1, 2013.

The three percent withholding law, which was enacted in Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) as Section 3402(t) of the Internal Revenue Code, mandates that federal agencies, states, and certain local governments withhold three percent of nearly all of their contract payments, Medicare payments, and farm payments. Compliance with this law will impose significant, unnecessary financial burdens on both the public and private sectors.

The withholding is a flat percentage of revenues from government payments, bears no relationship to companies’ taxable incomes, and will restrict cash flow needed for day-to-day operations and investments. In addition, the administrative and capital investment costs that compliance with three percent withholding will impose on businesses and governments will be substantial, and the mandate will be exceedingly complicated to implement. Three percent withholding will be especially burdensome for small businesses.

With the withholding mandate scheduled to take effect on January 1, 2013, businesses and governments are expending limited resources now in order to make the major system and process changes needed to implement this provision. This is a particular challenge for cash-strapped state and local governments.

This harmful provision will hamper our work on behalf of the public, and the Government Withholding Relief Coalition and its member organizations request your support for the amendment to repeal the withholding requirement.

Sincerely, Government Withholding Relief Coalition