ANALYSIS: A Conservative Tax Reform Idea That Needs a Gig in Current Bill

By NTK Staff | 11.03.2017 @1:55pm
ANALYSIS: A Conservative Tax Reform Idea That Needs a Gig in Current Bill

While Republicans and conservatives have been quick to unify around major provisions of the recently introduced tax reform bill, one of the subtler critiques to emerge is that the bill does not include enough actual reform of the tax code. That has been much of the debate over the last few months. Would this bill […]

While Republicans and conservatives have been quick to unify around major provisions of the recently introduced tax reform bill, one of the subtler critiques to emerge is that the bill does not include enough actual reform of the tax code. That has been much of the debate over the last few months. Would this bill be actual tax reform or tax cuts? From the initial coverage, much of the focus has been on who sees their taxes go up and who sees them go down.

What has not broken through is the amount of actual tax reform in the bill. One area of particular concern is the tax code and the new gig economy that has emerged. Think about this: the last time the U.S. tax code was overhauled in 1986, there was no Uber or AirBnB. The current tax code is seriously out of date when it comes to the “on-demand economy.”

Today, according to the Aspen Institute, 45 million people have worked or offered services through the “on-demand economy.” In any given month, approximately 2.5 million people use “on-demand” platforms to earn income. And these numbers are only going to grow.

Yet, there’s confusion in our tax and regulatory systems when it comes to this new gig economy and millions of Americans who earn income from them. The New GIG Act, introduced by Sen. John Thune (R-SD) and Rep. Tom Rice (R-SC), would remove this uncertainty. In its simplicity, the bill would have far-reaching implications.

First, it would fundamentally end the leftover Obama administration attacks against the “on-demand economy” and cut off the trial lawyer and union assault against companies like Uber, Lyft, and Instacart to classify workers as employees rather than the contractors they are. The bill would clarify the law so that these workers are safely classified as contractors. The Obama National Labor Relations Board, trial lawyers, and unions want to see new gig economy companies go out of business by forcing them to classify all their workers as employees and not contractors. This bill ends that.

Second, the bill simplifies and updates the tax code to bring it in-line with the modern economy. The complexity of the current tax code means that independent contractors are issued 1099s rather than W-2s. This means their income or payroll taxes are not withheld leaving it to the contractor to make quarterly estimated tax payments. This process is so confusing that most people are forced to spend time and money on professional tax preparation services. The New Gig Act would simplify the tax code to remove the uncertainty and needless tax preparation costs.

This is real tax reform, makes our tax code relevant to today’s economy, and brings certainty to a burgeoning sector of our economy. As the R Street Institute wrote in support of the bill, “This bill offers a commonsense update to our nation’s antiquated view of employment and updates tax laws that concern a worker’s employment status.” Moreover, it will actually help generate billions of dollars in new revenue without raising taxes.

Real tax certainty, real tax simplification, and real tax reform make this a real winning provision already sitting on the shelf for the tax bill writers in Congress to add to their legislation to make it even stronger and a no brainer vote.

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