By: Diane Ring
Shu-Yi and I started a blog post on new Section 199A that morphed into a seven-page essay that ultimately found its proper home on SSRN. Here is the abstract:
Is New Code Section 199A Really Going to Turn Us All Into Independent Contractors?
There has been a lot of interest lately in new IRC Section 199A, the new qualified business income (QBI) deduction that grants passthroughs, including qualifying workers who are independent contractors (and not employees), a deduction equal to 20% of a specially calculated base amount of income. One of the important themes that has arisen is its effect on work and labor markets, and the notion that the new deduction creates an incentive for businesses to shift to independent contractor classification. A question that has been percolating in the press, blogs, and on social media is whether new Section 199A is going to create a big shift in the workplace and cause many workers to be reclassified as independent contractors.
Is this really going to happen? How large an effect will tax have on labor markets and arrangements? We think that predicting and assessing the impact of this new provision is a rather nuanced and complicated question. There is an intersection of incentives, disincentives and risks in play among various actors and across different legal fields, not just tax. Here, we provide an initial roadmap for approaching this analysis. We do so drawing on academic work we have done over the past few years on worker classification in tax and other legal fields.
By: Diane Ring
Sometimes we do get what we are seeking. In some of my recent work on the sharing economy I have advocated for more discussion and analysis across legal boundaries, so that the rules we develop have outcomes that more closely match our goals and don’t bring unexpected—and undesired—surprises. The two-day conference on “Sharing Economy: Markets & Human Rights” that I have been attending at the College of Law and Business in Ramat Gan, Israel has provided just such an opportunity. The papers presented cover a wide range of legal fields and issues from taxation to discrimination, and will ultimately be published together in the Law & Ethics of Human Rights Journal. Although we are all benefiting from the discussion of our drafts and will continue to revise our work, some interesting themes have emerged already . . .
Continue reading “What’s Up with the Sharing Economy? (Report from the 13th International Human Rights Researchers Workshop)”
Diane Ring and I were invited to write a guest post for the On Labor blog, to explain the potential effects of tax reform on work arrangements for a labor law audience. There was some interest in tax reform among labor law experts in light of the New York Times article that ran on December 9, titled “Tax Plans May Give Your Co-Worker a Better Deal Than You.”
We wrote a pair of posts, describing the potential effects of tax reform on work arrangements (including decisions to form a passthrough or to classify oneself as an independent contractor).
Something that struck us in our attempt to translate the policy issues for a non-tax legal audience was the sheer complexity of some of the new provisions in the new proposed provisions and the difficulty of discussing them with integrity–maintaining nuance, not oversimplifying or being hyperbolic, but still being understandable. As others have noted, the creation of the proposed tax legislation and the subsequent commentary on it have both happened very quickly. Our attempt to explain clearly the proposed legislative provisions to a non-tax legal audience and to discuss the policy issues at stake really highlighted for us the complexity of these proposed laws, the policy pitfalls, and the perils of operating at high speed.
In any case, here are the posts:
Work-Related Distortions in the Tax Reform Bills: Understanding the New Proposed Provisions (Part 1 of 2)
…The goal of this two-part blog post is to summarize for a labor law audience how the proposed tax legislation creates these outcomes and to highlight the important policy issues that observers and commentators might be concerned about. This Part 1 focuses on the statutory provisions, and Part 2 will discuss the key policy conversations that are taking place….
Work-Related Distortions in the Proposed Tax Bills: Understanding the Policy Conversations (Part 2 of 2)
This post follows up on our prior post, which focused on the complex provisions of the proposed Senate tax bill. This post discusses some of the key concerns that have been expressed about the new tax bill. (Again, we focus here on the Senate version of the proposed legislation. The specifics of the analysis may change once we get the Conference version, though the broader policy and design questions are likely to persist.)
By: Francine J. Lipman
Senate & House dueling Tax Bills are now (more or less) out. Experts have determined the regressive nature of both tax bills, that is, overall tax increases on middle, low, lower, and the lowest income working families as compared to generous tax cuts for high, higher, and the highest income taxpayers. (Pet peeve here, please media et al. stop using “middle class” in lieu of “middle income” because if there is one lesson from 2017 that is that income level and class are not correlated).
Below is one of many compelling graphs from the Center on Budget & Policy Priorities evidencing that every group with income levels below $75,000 suffers a tax increase as compared to their higher income counterparts tax decrease in 2027. Many of these lower income taxpayers, including those with incomes below $30,000, suffer tax increases much earlier and most lower and middle income groups suffer tax increases by 2025, when the individual tax cuts phase out. Continue reading “Repeal of Child Tax Credit For Taxpayers Without a Voice, Is A Great Way to Defund the Success of America’s Kids”
By: Diane Ring
Shu-Yi Oei and I have been tracking the recent tax reform developments as well as a couple of proposed tax bills that deal with worker classification, information reporting, and tax withholding. Based on a description prepared by the Joint Committee on Taxation, it looks like the Senate Tax Bill is going to include a new safe harbor provision guaranteeing worker classification as an independent contractor and will make changes to independent contractor withholding and information reporting. We posted our analysis of this proposal and its potentially serious implications on TaxProf Blog: The Senate Bill and the Battles Over Worker Classification.
Our main points:
1. Not just tax: This worker classification safe harbor is not just about tax, it will likely have impacts on employment/labor law outcomes and protections as well.
2. Not just gig workers: Based on the Joint Committee description, the proposal is not limited to gig economy workers —anyone who meets the safe harbor requirements (which are pretty easy to satisfy in many cases) can be classified as an independent contractor. This may have the effect of encouraging employers to push workers into work relationships that come within the safe harbor. Or, in certain cases, it may facilitate the strategic movement of higher-income workers into independent contractor status — see point 4 below.
Continue reading “The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs”
By: Diane Ring
Yesterday I blogged about Day 1 of the international sharing economy conference, titled “Reshaping: Work in the Platform Economy.” Today the Conference resumed in Amsterdam and included a fascinating roundtable with representatives from some of the platform firms alongside some sharing economy workers. Each offered their experience/perspective on the sector, posed questions to each other, and took questions from the audience.
Not surprisingly, just as there are a range of business models and niches in the sector, there are also a variety of reasons why workers participate in and do platform work. What workers seek from the platforms (beyond good pay) may differ from worker to worker. For example, a sharing economy worker may desire contact with other workers, a sense of community, predictability, or worker dignity. Building on the Day 1 discussions, several themes emerged by the close of the Conference:
Continue reading “International Sharing Economy Conference: Day 2 Takeaways”
By: Diane Ring
Today the “Reshaping: Work in the Platform Economy” Conference got underway in Amsterdam. In contrast to many academic conferences, the explicit goal here is to bring together a truly wide array of actors in the sharing economy (policy makers, academics, actual gig workers, platform businesses, research institutes, and media) in a mixed format setting that includes academic presentations, panel presentations by gig workers, small group active round tables, and research-poster sessions. The international dimension, with participants and presenters from a variety of jurisdictions, contributes to the breadth of discussion.
I thought I would offer a few of my takeaways from day one: Continue reading “International Sharing Economy Conference: Day 1 Takeaways”
I came across a couple of news stories recently about how South Korea is introducing the world’s first robot tax. But based on the press reports, it sounds like the so-called robot tax is actually just a reduction of the tax deductions available to businesses that invest in productivity-boosting automation. The news sources themselves concede that this “robot tax” not exactly a tax on robots but rather a tax benefit reduction for automation investment.
Talk of a “robot tax” has landed at the forefront of tax news since Bill Gates mentioned it in a Quartz interview back in February of 2017. But of course, scholarship about robots (not to mention robots themselves) has been around for quite a bit longer. There’s even a “We-Robot” robotics law and policy conference that’s been going on since 2012, which I keep meaning to crash, but then there’s always something else going on.
A lot of what seems to be driving the tax conversation is the fear that robots are taking over jobs, though there’s some uncertainty about the extent to which robots are to blame.
Personally, I’ve been having a hard time squaring the newly ascendant tax conversation about the robot tax with the broader legal scholarship on robots. In some of the news and other commentary discussing Robotaxation, my reaction has been something to the effect of “I’m not sure that word means what you think it means.” Turns out, there is something of an existing conversation about what constitutes a robot in the first place—see, for example, Richards and Smart (2013) for a nice discussion of some of the definitional issues. See also this “What is a Robot?” piece in The Atlantic. In defining “robot,” it might matter how a robot moves in the physical world, what kind of quasi-independent agency it seems to exercise (autonomous vs. semi-autonomous), how humans interact with it, and even what sorts of emotions it triggers in us mere humans. We might understand some automated machines to be robots but others to just be automated equipment. And these distinctions make sense, from the viewpoint of areas like tort law, privacy law, the law of principals and agents, and the more general regulation of robots (and of artificial intelligence as a subcategory of robots).
But in some of the tax discussions about robots that I’ve seen on the interwebs, it’s quite clear that the authors don’t necessarily mean Robot when they say Robot. Continue reading “So about that Robot Tax…”
By: Diane Ring
Last month I blogged about new proposed legislation in Congress that sought to provide a safe harbor for gig worker classification for tax purposes. However, as I noted, the proposal implicitly favored one side of the debate by making the safe harbor one that would ensure the “easy” ability to classify a worker as an independent contractor (rather than an employee). In that post, I suggested that having tax lead the charge in this sharing economy worker classification debate perhaps allowed the tax “tail” to lead the employment relations “dog”. There are pressing nontax issues in the sharing economy that are driving litigation and dominating worker concerns – particularly employment law issues. Just last week, we saw further evidence of serious tensions in the landscape of sharing economy labor law.
On Tuesday, July 31, 207, in Chamber of Commerce of the United States, et al., v. The City of Seattle, a U.S. federal judge dismissed a challenge to legislation approved by the Seattle City Council in fall 2015. Pursuant to the Seattle law, businesses that hire or contract with taxi-drivers, for-hire transportation companies and “transportation network companies” must bargain with drivers if a majority want to be represented. That is, Seattle effectively allows Uber and Lyft drivers to unionize. Not surprisingly, Uber and Lyft objected to the law . . . Continue reading “The Front Lines of Sharing Economy Legal Debates”
By: Diane Ring
New legislation has just been introduced in the Senate that creates a “safe harbor” for independent contractor status. The proposed legislation provides that if a worker relationship satisfies certain criteria, then that worker can bypass the sometimes messy, multi-factor test for distinguishing between employees and independent contractors, and will be classified as an independent contractor for tax purposes. What prompted action now to address what has been a decades-old classification challenge for workers, businesses and the IRS alike? The gig economy. (Hence, the not-so-catchy title for the legislation: The New Economy Works to Guarantee Independence and Growth (NEW GIG) Act of 2017 (S. 1549).)
The legislation’s sponsor, Senate Finance Committee member John Thune, (R-S.D), described the impetus for the legislation as follows: “My legislation would provide clear rules so that these freelance style workers can work as independent contractors with the peace of mind that their tax status will be respected by the IRS.”
Is this really what gig workers are worrying about? . . . Continue reading “The Tail, the Dog, and Gig Workers”