State Comptroller Kevin Lembo on Wednesday urged Connecticut’s congressional delegation to repeal a provision of federal law that will force the state to partially withhold payments to vendors that do business with the state.
Approximately 3,000 state vendors could be deprived prompt full payment for services after the provision is implemented early next year, Lembo said.
The concerns center around the “Tax Increase Prevention and Reconciliation Act of 2005,” which will require Connecticut and certain municipalities to withhold 3 percent on payments to vendors for property and services in an effort to combat underpayment of taxes by some government vendors.
But Lembo said the provision ultimately harms all businesses in the process.
If the bill was implemented last year, for example, it would have forced the state to withhold $170 million from Connecticut companies.
“Connecticut businesses depend on — and deserve — prompt payment for their services,” Lembo said. “This law delays full payments to state employers — jeopardizing jobs and cash flow for thousands of businesses at the worst possible economic time. Depriving Connecticut companies of full payments, in good or bad economic times, is unacceptable.”
Lembo claims the law also burdens state and local taxpayers because implementing the withholding procedures will require significant funding, resources and logistics. It will force states and certain municipalities to hire additional staff, purchase new software and/or modify accounting systems.
