Overlooked Passage in GOP Tax Bill Would Gouge America’s Growing Army of Gig Economy Workers
“In return for clarifying that gig economy workers are contractors, Congress appears to be saying, those platforms will have to collect income taxes from those same workers. By doing that, Congress guarantees that more taxes will be paid—rather than the current system, which relies on individual contractors to correctly calculate and pay their own taxes, something that likely shortchanges the IRS to the tune of several billion per year, according to Caroline Bruckner, managing director of American University's Kogod Tax Policy Center.”
The TaxProf Blog points out that putting the NEW GIG bill’s language into the GOP tax reform bill would essentially pre-empt state and local legislative efforts to adopt legal protections for gig economy workers—who are essentially freelancers who often work exclusively and full-time for employers, but aren’t considered traditional employees under state and federal law.“As the worker classification fight has developed, one of the tactical moves we have seen employed by both sides is to back reforms that grant piecemeal incremental protections for workers. For example, the City of Seattle passed an ordinance granting rideshare drivers the right to collectively bargain. Others have proposed creation of a third category of worker in between employee and independent contractor,” they write. “It’s important to note that even though the NEW GIG legislation was promoted as clarification for gig economy workers, nothing in the text of the proposed NEW GIG legislation or the JCT-prepared [Joint Committee on Taxation] description [of the GOP tax reforms] limits this legislation to gig workers.”That’s the larger point. There is much to grumble about with this narrow area of the GOP legislation. It grants the legal presumption to employers that any worker management wants to treat as a contractor is designated as such under law. It further cements that pro-management position by limiting the IRS’ ability to reclassify contractors as employees. These provisions would absolve owners and management from many employer responsibilities for full-time employees, including the rights of workers to organize unions, earn minimum wages, outlaw child labor, and guarantee family and medical leave. They also call into question the applicability of anti-discrimination laws and health and safety regulations.“If one is going to sign off on this type of legislation, one should at least be aware of what the far-reaching consequences may be in order to make a conscious determination that it’s still worth doing despite these wide-ranging non-tax risks and costs,” co-authors Oei and Ring write. “Or, if one’s underlying normative goal is to harness tax reform in order to dilute worker protections in pursuit of business growth, one should be transparent about that too.”At the very least, gig economy workers and contractors ought to be aware that the GOP Congress is considering legislation that would skim 5 percent off their earnings—to be withheld for federal taxes by their employers. That’s in addition to contractors itemizing their expenses, which are deductible.In other words, Republicans in Congress are poised to rewrite key labor and tax law in a manner that puts corporate interests above workers, erodes long-standing workplace protections, and withholds earnings as employers currently do for employees—yet legally, these workers would not be considered employees.
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