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Reblogged:Biden May Outlaw Freelancing

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Brad Polumbo warns that the federal version of California's AB-5 gig work ban -- which even its own voters gutted this fall -- has been reintroduced:

uberstarves.jpg
The bill proposes to "help" this man by depriving him of freely-chosen work. (Modified from image by Kai Pilger, via Unsplash, license.)
[T]his legislation isn't coming out of nowhere. It's modeled after a similar but highly controversial California bill, AB 5, that likewise forced the reclassification of independent contractors.

President Biden supported AB 5 at the time, and is on the record supporting the PRO Act, too. And now that Democrats control Congress, it could pass the House and find support from the White House. The only question would be whether it could make it through the closely-divided Senate.

So, it's worth examining the sweeping impact this legislation would have on the economy.

The PRO Act would outlaw millions of existing jobs with the stroke of the president's pen.
Examining Polumbo does, with numbers and short stories, like the following:
"Transcription allowed me to stay at home, be my own boss, and control my workflow and whom I work with," 72-year-old transcriptionist Dori Lehner told the Independent Women's Forum. "I only have one direct client now, and I only get work when they have it. My income has dropped down to a quarter of what it was before AB5."
There are numerous such stories, including a well-publicized mass lay-off of California-based journalists, all ultimately caused by the fact that "reclassification" of workers -- a violation of the right to contract, to trade and make a living on one's own terms -- makes employment more expensive when it occurs.

Polumbo urges lawmakers to be mindful of the "unintended" consequences such legislation will rain down on American freelancers. But after the fiasco in California, it is hard for me to imagine that this legislation was introduced innocently.

It will be up to better Republicans, fiscally conservative Democrats, and politically active freelancers to point to the hardship AB-5 caused, and to raise such a stink about this proposal that even Nancy Pelosi and Chuck Schumer will notice -- in the form of fearing a loss of their majorities if this bill becomes law.

-- CAV

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California passed AB-5, and a judge ruled it applied to Uber and Lyft drivers, treating them as employees rather than independent contractors. Then Proposition 22 passed, supporting and supported by Uber and Lyft. The California state government and unions are still fighting to treat the drivers as employees.

How control is divided between the drivers and the companies makes the battleground. Control by the drivers favors them  being independent contractors, whereas control by the companies favors them being employees.

Uber  Lyft

Taxes is no small part of it. If employees, the company would pay half the drivers' payroll taxes which fund Social Security and Medicare. If independent contractors, the drivers pay 100% of the payroll taxes.

Income taxes for the drivers are also quite different for the two statuses. Qua employees, they get W-2s and do not file Schedule C.  Qua independent contractors, they do not get W-2s and do file Schedule C. The W-2 status provides a lot more oversight to the IRS via info provided by the employer; the independent contractor status and Schedule C provides a lot less oversight to the IRS. One of the advantages of Schedule C is being able to depreciate the vehicle used for work and take the standard mileage deduction. This often gives a bigger tax deduction than cash-incurred expenses for gas, maintenance, repairs, etc.

 

Edited by merjet
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