Noam Scheiber reported in the New York Times on Monday that, “The new tax law is likely to accelerate a hotly disputed trend in the American economy by rewarding workers who sever formal relationships with their employers and become contractors.”
The article explained that, “That’s because a provision in the tax law allows sole proprietors — along with owners of partnerships or other so-called pass-through entities — to deduct 20 percent of their revenue from their taxable income.
“The tax savings, which could be around $15,000 per year for many affluent couples, may prove enticing to workers. ‘If you’re above the median but not at the very, very top, one would think you’d be thinking it through,’ said David Kamin, a professor of tax law at New York University.
“The provision may also turn out to be a boon for employers who are trying to reduce their payroll costs. Workers hired as contractors, who tend to be cheaper, may be less likely to complain about their status under the new tax law.”
Nonetheless, Mr. Scheiber noted that, “But it could lead to an erosion of the protections that have long been a cornerstone of full-time work.
“Formal employment, after all, provides more than just income. Unlike independent contractors, employees have access to unemployment insurance if they lose their jobs and workers’ compensation if they are injured at work. They are protected by workplace anti-discrimination laws and have a federally backed right to form a union.
“Those protections do not generally apply to contractors. Nor do minimum-wage and overtime laws.”
The Times article added that, “David Weil, the administrator of the Labor Department’s Wage and Hour Division under Mr. Obama, believes the change will add fuel to a trend that has been several decades in the making.
“During that time, as Mr. Weil documented in a book on the subject, ‘The Fissured Workplace,’ employers have steadily pushed more work outside their organizations, paring the number of people they employ and engaging a rising number of contractors, temporary workers and freelancers.
“The tax law will accelerate the shift, he said, because employers who are already keen to reorganize in this way will recognize that even fewer workers are likely to object as a result of the tax benefits.”
