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Bill repeals harmful 3% withholding tax

Congresswoman Virginia Foxx (NC-05) voted today for legislation (H.R. 674) to repeal a federal mandate to require state, local and federal governments to withhold three percent of payments made to companies that do business with the government.  President Obama recently said this mandate “keeps capital out of the hands of jobs creators” and has endorsed the House bill.

“This federal mandate would have fallen particularly hard on small and family-owned businesses that don’t have massive cash holdings,” Foxx said.  “Repealing this job-killing regulation will help free up cash for small businesses that they can use to invest in their operations and in hiring new employees.”  

The three percent withholding rule was originally intended to increase compliance with federal taxation.  However, most companies that do business with local, state or federal governments would be unfairly harmed by the new requirement that aimed to curtail tax delinquency. 

Additionally, government agencies have questioned whether the additional tax revenue collected would be greater than the cost of complying with the new rule.  For instance, the Department of Defense estimated that it would spend $17 billion over 5 years to comply with the rule, while the withholding provision is only expected to bring in $11 billion over the next ten years. 

The three percent withholding repeal bill, H.R. 674, passed the House 405-16.

“There are better ways to go after tax scofflaws than punishing all job-creators with a harmful government mandate,” Foxx said.  “I’m pleased that the House passed this bipartisan bill and urge the Senate to give it an up or down vote as soon as possible.  More than 15 bipartisan bills focused on job-creation have passed the House and are awaiting a vote in the in the Senate.  It’s past time they got to work.”