WASHINGTON, D.C. – Senator Olympia J. Snowe (R-Maine) today welcomed a decision by the Internal Revenue Service (IRS) to delay implementation of a three percent withholding requirement on government contracts by one year, but also insisted the rule should ultimately be repealed to protect the ability of small businesses to compete for these contracts.  Snowe, the Ranking Member on the Senate Committee on Small Business and Entrepreneurship, is urging Congress and the Administration to repeal this onerous tax provision that would impose billions of dollars of compliance costs on both the public and private sectors. 

“Compliance with this law will impose billions of dollars of costs on both the public and private sectors, regardless of when it takes effect,” said Snowe.  “This pending regulation exacerbates uncertainty faced by small businesses and job creators nationwide and should be repealed outright.”

Senator Snowe also noted the regulation would cost more in compliance than it would raise in revenue.  “The Department of Defense estimated that it would cost over $17 billion in the first five years to comply, while the original revenue estimate projected that only $6.977 billion would be collected over a 10-year timeframe.  This is a case of spending a dollar to collect a dime, which is counter-productive when it comes to addressing the nation’s deficits,” said Snowe. 

BACKGROUND: At the Senate Finance Committee’s markup of the Airport and Airways Trust Fund legislation on February 8, Snowe offered an amendment to repeal the three percent withholding requirement.