Treasurer Loftis testifies before Congressional subcommittee against tax withholding law
May 26, 2011
(Columbia, SC) – This morning, South Carolina State Treasurer Curtis Loftis testified in Washington, D.C. before the House Subcommittee on Contracting and Workforce. Treasurer Loftis spoke against a measure, IRS Section 511, that requires federal, state and local government agencies to collect a 3% withholding tax whenever government contract is paid.
“The requirement presents an administrative nightmare,” Treasurer Loftis told the committee. “Compliance with this requirement will prove financially oppressive to private industry and will cost jobs. The 3% withholding requirement penalizes all tax compliant businesses. It forces them to provide the federal government with an interest-free loan by requiring advance payment of taxes that may not be due at the end of the year.”
Click Here to read Treasurer Loftis’ entire testimony to the committee.
Click Here to see video of the testimony.
In addition to his duties as State Treasurer, Mr. Loftis owns a small business. Treasurer Loftis also took part in a bipartisan press conference after the hearing. Treasurer Loftis told the gathering the withholding tax is like the airline commercials where frequent flyer customers are being wrapped up in red tape.
“Adding more regulations to small businesses and government is the last thing South Carolina can afford as it faces an unemployment rate near 10%,” Treasurer Loftis said. “The tax could result in contractors raising their prices to government agencies, which would be passed along to taxpayers.”
Currently, companies with government contracts declare withholding at the federal tax deadline. If a company declared a loss at the end of the tax year, its tax burden could be less than if it is automatically withheld when acontract is paid.
Created by Section 511 of the 2006 Tax Increase Prevention Reconciliation Act, the tax requires that, federal, state and local governmental entities whose annual expenditures exceed $100 million withhold three percent of all payments made to any individual or company that has provided goods or services to the government. The tax is set to go into effect in 2013.