The new federal 3 percent tax withholding rule will force all large municipalities, all states and all federal agencies to withhold 3 percent of every payment to every contractor until contractors finalize their tax returns for the year. According to a nationwide construction industry survey the association conducted, 55 percent of construction firms report that public projects accounted for 51 percent of more of their revenue in 2010. Meanwhile 63 percent of firms report that their average profit margin for public projects was less than 3 percent. This means the tax rule will force contractors to carry a loss on public work for months at a time, officials added. “The more contractors are forced to temporarily plug budget holes, the more the economy will suffer,” said Stephen E. Sandherr, the association’s chief executive officer.
Thursday, Oct. 20th 56 Senators voted in favor of repealing the 3 percent tax withholding rule. Unfortunately, the measure needed 60 votes to pass. Montana Senator Max Baucus did not support the measure. On Friday, Oct. 21st, AGC and the Montana Contractors Association held a media event in Helena, Montana to highlight the need to repeal the tax withholding measure. As a result of that event, Senator Baucus was forced to explain his vote against the repeal measure, noting his objections were to the way the vote was handled, and not to actually repealing the measure. As his staff told the Helena Independent Record:
"Max didn’t vote to create the 3 percent withholding rule in the first place, and he stands with Montana contractors in their efforts to make sure it isn’t creating red tape that hampers Montana jobs. Last night’s vote was nothing more than political theater because the bill violated Congressional procedural rules and never could have passed. Under the Constitution, revenue measures must originate in the House. So, if the Senate had passed the repeal as written, it would have never been able to pass into law. Max is focused on working with his colleagues to develop real solutions that address the legitimate concerns of honest folks like the Montana contractors and also makes sure that the real tax cheats aren’t able to get government contracts."
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Those interested in getting involved with the effort to repeal the 3 Percent Tax Withholding Mandate should visit our Take Action page.
This story was covered by The Washington Post, The Helena Independent Record, Big Sky Business Journal, Beartooth News, KRTV News, KTVQ News, KXLH Channel 9 News, Albuquerque Journal, Birmingham Business Journal and the Phoenix Business Journal.
For more information contact Brian Turmail at turmailb@agc.org or (703)837-5310.