June 20, 2011 TO THE MEMBERS OF THE UNITED STATES CONGRESS: The undersigned organizations, individuals and businesses of every size and industry, and employing millions of American workers, stand united in calling for Congress to repeal the burdensome 3% Withholding Tax that was enacted in Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) before it takes effect on January 1, 2013. Unless repealed, the 3% Withholding Tax will have a dramatic, negative impact on millions of honest taxpaying businesses, farmers, doctors and hospitals, as well as state and local governments. Under this provision, the Internal Revenue Service (IRS) was given new broad sweeping authority to hold hostage 3% of nearly every transaction between the public and private sector—giving the federal government an interest free loan on the backs of many honest taxpayers. The onerous nature of this unfunded mandate can best be described by example. After January 1, 2013, should a covered local fire department elect to replace an outdated ambulance with a new one, 3% of the sales price of the vehicle will be withheld from the ambulance seller and sent by the local government to the IRS. In order to compensate for the loss of cash flow, this business will likely increase the cost of the vehicle, which will in turn negatively impact the local fire department’s budget. In order to track, handle and reconcile the transaction, additional paperwork and complex accounting systems will be needed by the IRS, the local government, and the ambulance seller. As federal, state and countless local governments will be mandated to withhold 3% on their payments for many of their purchases, Medicare payments, and farm payments, this example will be multiplied many times over. Governmental entities, as well as public school systems and universities, will pay more for goods and services in addition to major construction and repairs. The tax will drive up the cost of rebuilding and repairing the nation’s deteriorating infrastructure. Local police budgets and cash-strapped businesses will be negatively impacted. Many in the medical community, already frustrated with Medicare reimbursement processes and rates, may opt to no longer accept Medicare patients due to this added burden, leading to diminished care for the elderly. The ultimate irony of the 3% Withholding Tax is that it will cost more to implement than it is estimated to raise in new revenue. A revenue estimate of legislation to repeal the 3% Withholding Tax vastly overestimates the amount of revenue that would be “lost” without implementation, due to an accounting gimmick. The tax is estimated to “increase” revenue by $8.2 billion in its first five years but would actually bring in nearly $6 billion of that amount in the first year solely due to accelerated tax receipts and not to an actual revenue increase from improved tax compliance. Moreover, a private-sector study has estimated that the 3% Withholding Tax will cost federal, state and local governments as much as $75.2 billion in implementation costs during this same time period. We strongly support the view that those receiving payments from the government should meet their federal, state and local tax obligations. However, imposing an onerous 3% Withholding Tax on nearly every transaction between government and honest taxpaying businesses is not the answer. For these reasons we urge you to expeditiously repeal the 3% Withholding Tax. Sincerely, Angela G. Tapley, C.P.A. Mobile Alabama Beef'O'Brady's Family Sports PUb Prattville Alabama CC, Inc. Mobile Alabama Data Capture Consultants, Inc. Mobile Alabama ES Robbins Corporation Muscle Shoals Alabama Georgetown Auto Parts Wilmer Alabama Judy J. 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