Tuesday, January 15, 2019
Diane Ring (Boston College), Section 199A’s Workplace Shift:
As we mark the one year anniversary of tax reform, the aftermath continues to dominate tax policy analysis. New § 199A, which my co-author, Shu-Yi Oei, and I initially explored here and here and here, continues to attract significant attention, both in terms of the provision’s likely substantive effects, and the legislative, regulatory, and political issues it raises.
One of the most compelling, yet underanalyzed, questions is how § 199A could impact labor and dramatically reshape work, the workforce, and the workplace. In a new paper posted on SSRN on December 3, titled “Tax Law’s Workplace Shift,“ Shu-Yi and I tackle these issues in detail. In brief, the paper explores the factors that will determine whether § 199A is likely to cause a workplace shift from employee to independent contractor arrangements, and, if it does, how such a shift should be normatively evaluated. Ultimately, we show how our evaluation of these § 199A workplace effects must depend on the types of workers and work at issue. While a § 199A-induced shift towards independent contractor classification may make some workers more precarious, empirical data suggests that for others, such a shift may have different (and perhaps differently troubling) effects. Our Article lays a framework for analyzing the full range of the new deduction’s impacts and maps a course for further study of tax reform’s impacts on the future of work.
The question of the new passthrough deduction’s effects on work is likely to remain significant, and will continue to be investigated by tax scholars. (See, e.g., a new December 19th Center on Budget and Policy Priorities essay by Brendan Duke, “Pass-Through Deduction in 2017 Tax Law Could Weaken Wages and Workplace Standards”). ...
Looking ahead to the coming year in the U.S., the two important questions will be: (1) does new § 199A create real shifts in the workplace that pose serious policy concerns? and (2) does § 199A create false shifts in the workplace through unwarranted “re-labeling” of workers? The first problem demands a careful re-examination of the incentives that the new law has introduced into the workplace. The second problem demands careful attention at the enforcement level. Stay tuned!