A lot has happened in the 27 years since President Ronald Reagan signed the Tax Reform Act into law. Walk into any Starbucks, turn to the person in the next cubicle or read about the explosion of co-working spaces in Detroit, and you will find a major disruption in the labor market.
While it is important to consider how to tax corporations, the 1 percent and the middle class, Congress must also confront the tax implications affecting self-employed entrepreneurs.
Forty percent of the American workforce are considered independent workers. Yet working in the gig economy is still undefined and not counted in existing labor statistics.
We aren’t just your Uber driver. We are the person who designed your website, created your logo and fixed your computer. We are your public relations consultant, your business coach and your administrative assistant. We could be your doctor.
The U.S. Bureau of Labor Statistics calls us contingent workers, those who don’t have an implicit or explicit contract for long-term employment, working in alternative arrangements. While many of us don’t employ people or maybe one other person, we do manage other consultants on a particular gig. Which could be short-term projects or monthly retainers that last 12 years or more.
In fact, companies today bring independent consultants into their offices to work on specific projects, to either avoid paying benefits or to test the waters before making them a full-time worker.
While some of us may value our independence and embrace the diversity of work, we all want stability in the benefits we receive and find ways to eliminate any barriers to our growth. Our tax code today is designed for the 20th century workforce. We are not small businesses we are independent. You may even think of me as an entrepreneur, when I am really just a solopreneur — it’s just me.
While H.R. 3717, the Small Business Owners’ Tax Simplification Act would simplify the tax code for entrepreneurs, Congress needs to dig deeper, for such things as retirement savings and benefits such as participation in Cafeteria Plans or flexible spending accounts, expanding the EITC to the self-employed, allow us to deduct health expenses from our business income and reevaluate retirement savings and paid leave.
While Congress explores opportunities to encourage growth of America’s independent workforce, state legislators and municipalities should also take a look at what they can do to strengthen their independent workforce by introducing or extending benefits and protections afforded to traditional employees.
Both the state and federal government should also find ways to revise old laws to support our nation’s modern workforce. As it considers new laws for autonomous vehicles, drones even cyber-warfare, old laws are impeding growth and must be reviewed and revised.
If Michigan is to attract companies like Amazon, it needs to adapt its laws to the evolving worker. Washington state, for example, is considering legislation that would create a portable benefits fund that would provide contributions to health insurance, paid time off, retirement, and workers’ compensation insurance.
It’s time we embrace a modern workforce and come to terms that one size no longer fits all. Our economic future depends on it.
Daniel Cherrin is the founder and CEO of North Coast Strategies, an independent public relations firm.