A provision passed last year by Congress would require state and local governments to withhold three percent of the gross payments to their contractors. Legislation has been introduced to repeal this provision before it is scheduled to take effect. Below is the statement the LMC has sent to all area Congressional representatives. If you agree, please contact area members of Congress as well:
The previous Congress passed a provision that requires state and local governments to withhold three percent of the gross amount of payments made to contractors for federal income taxes. The Labor-Management Council is strongly opposed to this provision.
For many government contractors, the total profits per job are less than three percent. In effect the withholding will make government contracting unprofitable and thus impossible for most companies, except those passing along the highest profit margins to taxpayers. This provision will also have a disparately harmful effect on small businesses, for whom capital formation is a challenge. Such a provision is unnecessary for insuring proper tax compliance, is harmful to government contractors and ultimately harms state and local governments.
The three percent provision is a penny-wise, pound-foolish policy. We urge you to make sure that future federal budgets and regulations do not include this new, onerous and unwise provision.
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