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3 Percent Withholding Repal and Job Creation Act

Floor Speech

By:
Date:
Location: Washington, DC

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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.

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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.

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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.

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