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Why does the government want to discourage a free-flowing labor market? Some thoughts: 1. It's easier to force GE to pay the correct payroll taxes for 100K e

Why does the government want to discourage a free-flowing labor market? Some thoughts: 1. It's easier to force GE to pay the correct payroll taxes for 100K employees than it is to police thousands of single-employee "companies" that file Schedule C's. 2. The government has co-opted corporations into providing pieces of the social safety net such as unemployment benefits, health insurance, etc. If a minimum wage employee was offered $1/hour more to be a contractor, he might take it. Then, if laid off, he might go on welfare instead of unemployment insurance paid for by the employer's contributions. Employment law enforces a bunch of social safety net stuff which can be circumvented by contractors. 3. Net taxes paid would decrease if everyone was a contractor. I have the right to pay myself a percentage of my earnings and take the rest as dividends which are not subject to payroll tax, etc. Also, I can deduct mileage from my home office and other things that reduce taxable earnings. Can anyone think of other reasons?

protomyth 17y ago
Because individual contractors don't pay lobbyists like lawyers and union bosses. Point 1 is kinda wrong because the IRS has a better chance of "convincing" individual contractors to pay taxes correctly. Point 3 evens out and you tend to pay just as much.
- ShabbyDoo 17y ago
  "the IRS has a better chance of "convincing" individual contractors to pay taxes correctly" Two things here: 1. Auditing GE's centralized payroll system is a lot easier than auditing 10K little businesses. Also, GE has so much to lose that it likely obeys the letter of the law. 2. GE doesn't pay its employees and then realize on April 15th that it doesn't have any money in the bank. Tons of small businesses end up owing money to the IRS because the owner (the painting contractor, etc.) didn't plan ahead. Edit: Please note that I was referring specifically to payroll taxes in my original comment -- not international tax law, etc.
  - protomyth 17y ago
    GE can lawyer up pretty fast, most individuals will do exactly what the IRS tells them since they can freeze your accounts and put liens on you without a court date. As I pointed out elsewhere, this isn't driven by logic or the IRS, it is driven by lobbying money.
    - ShabbyDoo 17y ago
      There clearly are many grey areas in corporate taxation, especially when certain laws only apply to a few large companies. However, payroll taxes are not such a beast. The rules for how much must be paid as a percentage of W2 wages are pretty simple and easily audited. Furthermore, there's a built-in cheating detection system -- employees file individual income taxes and assert the tax payment details provided by their employers. So, it's easy for the IRS to figure out where fraud is happening. Dispatching an army of lawyers to argue against the obvious is of little value.

protomyth 17y ago

Because individual contractors don't pay lobbyists like lawyers and union bosses. Point 1 is kinda wrong because the IRS has a better chance of "convincing" individual contractors to pay taxes correctly. Point 3 evens out and you tend to pay just as much.

ShabbyDoo 17y ago
"the IRS has a better chance of "convincing" individual contractors to pay taxes correctly" Two things here: 1. Auditing GE's centralized payroll system is a lot easier than auditing 10K little businesses. Also, GE has so much to lose that it likely obeys the letter of the law. 2. GE doesn't pay its employees and then realize on April 15th that it doesn't have any money in the bank. Tons of small businesses end up owing money to the IRS because the owner (the painting contractor, etc.) didn't plan ahead. Edit: Please note that I was referring specifically to payroll taxes in my original comment -- not international tax law, etc.
- protomyth 17y ago
  GE can lawyer up pretty fast, most individuals will do exactly what the IRS tells them since they can freeze your accounts and put liens on you without a court date. As I pointed out elsewhere, this isn't driven by logic or the IRS, it is driven by lobbying money.
  - ShabbyDoo 17y ago
    There clearly are many grey areas in corporate taxation, especially when certain laws only apply to a few large companies. However, payroll taxes are not such a beast. The rules for how much must be paid as a percentage of W2 wages are pretty simple and easily audited. Furthermore, there's a built-in cheating detection system -- employees file individual income taxes and assert the tax payment details provided by their employers. So, it's easy for the IRS to figure out where fraud is happening. Dispatching an army of lawyers to argue against the obvious is of little value.