Tag: Uber

TIGTA’s Report on the Growing Gig Economy

By: Joseph C. Dugan, Trial Attorney, Department of Justice, Civil Division* 

On February 14, 2019, the Treasury Inspector General for Tax Administration (TIGTA) released a Valentine’s Day treat: a comprehensive report following a TIGTA audit concerning self-employment tax compliance by taxpayers in the emerging “gig economy.”

As Forbes noted last year, over one-third of American workers participate in the gig economy, doing freelance or part-time work to supplement their regular incomes or stringing together a series of “gigs” to displace traditional employment.  Popular gig services include ride-sharing giants Uber and Lyft; arts-and-crafts hub Etsy; food delivery services GrubHub and Postmates; and domestic support networks Care.com and TaskRabbit.  Even Amazon.com, the second-largest retailer in the world and a traditional employer to many thousands of workers in Seattle and at Amazon distribution centers worldwide, has gotten in on the gig economy with its Amazon Flex service.  And for those interested in more professional work experience to pad their resumes, Fiverr connects businesses with freelance copywriters, marketers, and graphic designers.  The power of smartphones and social media, coupled with flat wage growth in recent years, makes the digital side hustle appealing and, for many households, necessary.

From a tax revenue perspective, the gig economy is great:  it is creating billions of dollars of additional wealth and helping to replenish government coffers that the so-called Tax Cuts and Jobs Act (TCJA) has left a little emptier than usual.  From a tax compliance perspective, however, the gig economy presents new challenges.  Gig payers generally treat their workers as independent contractors, which means that the payers do not withhold income tax and do not pay the employer portion of FICA.  Instead, the contractor is required to remit quarterly estimated income tax payments to the IRS and to pay the regressive self-employment tax, which works out to 15.3% on the first $128,400 in net earnings during TY2018, and 2.9% to 3.8% on additional net earnings.  That self-employment tax applies even for low-income freelancers (i.e., it cannot be canceled out by the standard deduction or nonrefundable credits). Continue reading “TIGTA’s Report on the Growing Gig Economy” →

IU Tax Policy Colloquium: Ring, “Silos and First Movers In the Sharing Economy Debates”

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Prof. Diane Ring

By: Leandra Lederman

On March 1, the Indiana University Maurer School of Law welcomed Surly’s own Prof. Diane Ring from Boston College Law School as the fourth speaker of the year in our Tax Policy Colloquium. Diane presented a new paper, which I believe is not yet publicly available, titled “Silos and First Movers In the Sharing Economy Debates.” This interesting paper focuses on the classification of workers in the “sharing” or “gig” economy as employees or independent contractors, arguing that “[t]wo interacting forces create the most serious risk for inadequate policy formulation: (1) silos among legal experts, and (2) first-mover effects.” (Page 1 of the draft.) The silo argument is that lawyers operate in subject areas that are isolated from each other, such that tax experts, for example, fail to perceive the effects of tax-related worker-classification rule changes on non-tax (such as employment) law, and vice versa. The first-mover argument is that the first actors on the worker-classification issue can wield outsized influence, shaping the debate in legal contexts other than the one directly affected.

The paper and presentation provide interesting insights into how giants of the service-worker sharing economy—not just Uber and Lyft, but also TaskRabbit—influence the development of the law on worker status. And subject-matter silos are a common complaint among legal academics. That issue has arisen in administrative law, for example, where there may be different rules developed in the context of different agencies. Courts and policymakers may struggle with tax exceptionalism (in the parlance of Kristin Hickman). But I wonder both if the legal silos in the gig economy are as strong as the paper suggests, and whether the effects the paper observes are first-mover effects or something else. Continue reading “IU Tax Policy Colloquium: Ring, “Silos and First Movers In the Sharing Economy Debates”” →