In a new letter, state and local governments urge “immediate” repeal of the IRS’s three percent withholding tax, a job-killer that forces agencies at every level to hold hostage three percent of just about every payment for goods and services. This week, the House will move to repeal the withholding tax, with a bipartisan bill that’s both “a piece of President Barack Obama’s $447 billion jobs bill” and part of Republicans’ Plan for America’s Job Creators.
A broad-based coalition of job creators and small business owners also support immediate repeal. As the U.S. Chamber of Commerce notes, “the profit margin for many businesses is often less than 3%, meaning that the withholding tax will create significant cash flow problems for day-to-day operations as well as draining capital that could be used for job creation and business expansion.”
Here’s what state and local officials have to say in their letter, which is signed by governors, mayors, state legislatures, comptrollers, treasurers, county executives, and retirement administrators:
- Implementation of this Federal Mandate Would Strain Already Scarce Local Resources. “This troubling provision will cause state and local governments to focus scarce resources on implementation… Sophistication of systems necessary to capture and report the required data vary greatly between governments and most entities do not have the resources, capacity or staff to undertake the required withholding and remittance.
- The Tax Will Hurt Businesses, Which Will Pass On Costs to Governments. “Similarly, businesses will face enormous administrative and financial challenges … at a time when they are trying to focus on creating jobs and encouraging economic growth. … Additionally, state and local governments cannot withstand an increase in the cost of goods and services that will likely result when private sector companies pass along the three percent withheld as a cost of doing business.”
- Compliance Costs Start Now, Revenues Wouldn’t Come Until Later. “We urge you to support HR 674 as state and local governments must start spending scarce resources now in order to comply with a January 2013 deadline.”
There’s no reason whatsoever for the White House to oppose repealing the withholding tax. It’s part of the president’s jobs plan, and it’s paid for from the president’s deficit plan. It’s a bipartisan effort to help state and local governments, which is something the president has talked a lot about in recent weeks. It’s also an opportunity to build on the recent enactment of much-needed free trade agreements. There’s common ground to be found, but getting more done will require a willing partner in the White House.