Tax Law’s Workplace Shift

Authors

Shu-Yi Oei, Duke Law SchoolFollow
Diane M. Ring

Document Type

Article

Publication Date

2020

Abstract

In December 2017, Congress passed major tax reform. The reform included an important new provision that granted independent contractors and other pass-through 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 (codified at 26 U.S.C. § 199A) could lead to a widespread shift toward independent contractor jobs as workers seek to reduce taxes paid. This shift could cause workers to lose important employee protections and leave them more economically 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 nontax legal changes and nonlegal economic developments are transforming work arrangements and classification choices; § 199A is only one factor. Moreover, § 199A is not the only tax law change that is likely to impact classification choices.

Drawing on empirical data on contemporary workplace trends, this Article also argues that even if new § 199A induces a workplace shift, how this shift is evaluated must depend on the types of workers and the 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. This Article lays a framework for analyzing how tax law contributes to and interacts with other factors in ultimately shaping contemporary work arrangements.

Citation

Shu-Yi Oei & Diane M. Ring, Tax Law’s Workplace Shift, 100 Boston University Law Review 651-721 (2020)