Taxes and the Gig Economy
Laura Saunders’s “Tax Report” column from this weekend tangentially raises an important question — rather, an important lesson:
While some gig workers mean to cheat Uncle Sam, experts say others are bewildered by tax requirements that can be almost as complex for the owner of a microbusiness as for a much larger firm. Many know nothing about Schedule C (for a small business), payroll taxes and quarterly estimated payments. Often they’re unaware of valuable write-offs as well.
“The government isn’t getting the money it’s owed, and workers aren’t taking the deductions and offsets they’re allowed,” says Caroline Bruckner, managing director of the Kogod Tax Center at American University, who studies microbusiness issues. In a survey she conducted of self-employed business owners working in the gig economy, 69% reported receiving no tax information from the platform they used.
Bottom line: the tax system is too complex. That alone hurts our economy and innovation. Sure, maybe the IRS and state and local governments could come up with ways to make taxes easier to pay, but nothing would beat a simple flat rate based on income. Simply take your income and multiply it by the universal rate, and there’s your tax.
That also has the benefit of reducing incentive to use government to take other people’s money for yourself. Take away withholding, too, and people will have every reason to assess the value of the services for which they’re being taxed.
Of course, complexity is exactly what the government wants, creating plenty of opportunity to take too much, plenty of reason to hire more tax collectors, and a weapon to use against the public when wanted, not only with the punishment of an audit, but with the reality that most people will have at some point done something that they shouldn’t have, inadvertently or otherwise.