Tax Law's Workplace Shift

66 Pages Posted: 3 Dec 2018 Last revised: 26 Mar 2019

See all articles by Shu-Yi Oei

Shu-Yi Oei

Boston College Law School

Diane M. Ring

Boston College - Law School

Date Written: February 16, 2019

Abstract

In December 2017, Congress passed major tax reform. The reform included an important new provision that grants independent contractors and other passthrough taxpayers, but not employees or corporations, a potential tax deduction equal to 20% of their qualified business income. Critics have argued that this new deduction (26 U.S.C. § 199A) could lead to a widespread shift towards independent contractor jobs as workers seek to reduce taxes paid. This shift could cause workers to lose important employee protections and leave them more vulnerable.

This Article examines whether this new tax provision will create a large-scale workplace shift, and if it does, how that shift should be normatively evaluated. It argues that while tax law in general has important and underappreciated effects on work arrangements, it is difficult to isolate § 199A as the driver of a broad workplace shift. Several other non-tax legal changes and non-legal economic developments are transforming work arrangements and classification choices, and § 199A is only one factor. Moreover, § 199A is not even the only tax law change that is likely to impact classification choices.

We also argue, drawing on empirical data on contemporary workplace trends, that even if new § 199A induces a workplace shift, how this shift is evaluated must depend on the types of workers and work at issue. While an independent contractor shift may increase precariousness for some workers, empirical data suggests that for others, a shift may be less troubling, or troubling for different reasons. Our Article lays a framework for analyzing how tax law contributes to and interacts with other factors in ultimately shaping contemporary work arrangements.

Keywords: 99A, Tax Cuts And Jobs Act, Tax Reform, Worker Classification, Independent Contractors, Employees, Labor Law

JEL Classification: H20, H24, H25, H27, H29, J00, J32, J80, J83, K20, K23, K31, K34

Suggested Citation

Oei, Shu-Yi and Ring, Diane M., Tax Law's Workplace Shift (February 16, 2019). Boston University Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3285591 or http://dx.doi.org/10.2139/ssrn.3285591

Shu-Yi Oei (Contact Author)

Boston College Law School ( email )

885 Centre Street
Newton, MA 02459-1163
United States

Diane M. Ring

Boston College - Law School ( email )

885 Centre Street
Newton, MA 02459-1163
United States

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