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Public Statements

Repeal 3 Percent Withholding Provision

Floor Speech

Location: Washington, DC

Mr. HERGER. Madam Speaker, the 3 percent withholding provision, which will come into effect if Congress does not act, essentially forces businesses that have contracts with the government to forgo 3 percent of their payments as a downpayment on their tax bill. This represents yet another burden on our Nation's small businesses and job creators, the lifeblood of our economy.

As a small businessman, I know firsthand about the negative impact of burdensome taxes and cumbersome regulations. Many small businesses that contract with the government operate on very slim profit margins, so a 3 percent tax would create serious cash flow problems for them at a time when so many are struggling. Aside from that, this provision will actually cost the government money. Federal, State, and local governments are already facing unprecedented deficits, and yet agencies will have to create new collection systems and may face higher costs for goods and services if this is not repealed. The Department of Defense has said that for the DOD alone, the provision will cost $17 billion to implement. Madam Speaker, that is $7 billion more than the total revenue the tax is expected to raise. In another example of Washington math, the provision will force the government to spend more money and end up eliminating jobs and hurting small businesses.

Congress can certainly do better. We must do better. Twenty million Americans are out of work, and our small businesses must have the certainty they need to create more jobs. We cannot punish law-abiding businesses because a few contractors do not pay their taxes. Instead, the government should stop awarding government contracts to businesses that do not pay. To that point, the OMB and the Treasury Department have announced several initiatives to prevent contracts from going to companies that are delinquent on their taxes.

Madam Speaker, we're looking for something we can do right now to help job creation in America. Well, this is it. Repealing the 3 percent withholding provision will provide a significant benefit to small businesses just by getting Washington out of their way. If we don't repeal it, we will put small businesses, jobs across America, and our efforts at economic recovery at greater risk. It's time to get this harmful job-killing provision off the books forever.

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