Small Businesses Support H.R. 275

Please Co-Sponsor this important legislation

Dear Member of the United States House of Representatives:

The Small Business & Entrepreneurship Council (SBE Council) urges your support of H.R. 275  - a bill to repeal Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005.  The mandatory withholding measure, scheduled to go in effect in 2012, requires federal, state and many local governments to withhold three percent of many payments made to contractors.

This initiative was originally conceived as a strategy for closing the "tax gap," but the measure will only cost more money to administer while hurting small businesses.   SBE Council members have reported that the mandate will create serious cash flow issues for their firms, and prevent many from bidding on government contracts. Some have reported they will raise prices in order to cover the cost of the mandate.  In the end, taxpayers will lose.

A study released last year by the Department of Defense (DoD) estimates that the implementation cost of the mandate would amount to $17 billion over the first five years.  The Joint Committee on Taxation (JCT) estimated that the mandate would generate $7 billion over five years.  Clearly, the cost of implementing the new law, and for one government department alone, will greatly exceed the revenues that are anticipated from the initiative.

Repealing the 3 percent withholding mandate makes economic and fiscal sense.  With the cost of the mandate far exceeding anticipated revenue gains, and small firms getting squeezed and becoming less able to compete for federal contracts, advancing the measure should be a foregone matter for Congress.

Please co-sponsor H.R. 275 today.  Thank you, in advance, for your support of small business.

Sincerely,

Karen Kerrigan, President & CEO