Lawmaker bemoans tax ‘buzzsaw’ for on-demand economy workers

The chair of the House’s small business panel on Tuesday probed ways in which the tax system is failing workers in the so-called on-demand economy.

House Small Business Committee Chairman Steve Chabot (R-Ohio) praised on-demand economy companies like Uber and Lyft for the way he said they had empowered individuals to strike out on their own.

{mosads}“However, in their enthusiasm these entrepreneurs are running smack dab into the buzzsaw of an outmoded tax code that is not designed to accommodate them,” he said.

Chabot was echoing concerns raised by many involved in the on-demand space that the government’s tax apparatus has trouble handling the independent contractors who form the backbone of companies like Uber and Lyft. Chabot said that many forget to file their taxes or pay too much because they are unaware of benefits that might be available to them.

Rob Willey, TaskRabbit’s vice president of marketing, said that “many platform economy participants either do not know or are not fully aware of both their tax obligations or tax benefits as a result of earning income on platforms like TaskRabbit.”

Later, he indicated that he hoped that there might be a solution to the issue available from the private sector.

“Is it possible that there’s some enterprising entrepreneur out there that could come up with an app, form their own company, to kind of solve this problem rather than the government figure it out for them?” he asked a witness.

The top Democrat on the committee, Rep. Nydia Velázquez (N.Y.), expressed more concern with the fact that workers at many on-demand economy companies work as independent contractors rather than employees, who often receive more benefits.

“Such a class saves businesses money through reduced benefits and tax withholdings,” she said.

The comments came at a hearing grappling with the way the tax system handles on-demand economy workers, which has become one of the pressing questions facing operators, workers and regulators with the rise of companies like Postmates and TaskRabbit.

The classification question raised by Velázquez is more fraught. Sen. Mark Warner (D-Va.), a major voice on the issue, has expressed a wariness of using the traditional employee-contractor model to frame the on-demand economy. Some have raised the prospect of a third classification type that could be used for the workers, though that idea has not gained political traction.