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Uber Hit with $650M Employment Tax Bill in New Jersey
- deleted 7y ago[deleted]
- jdhn 7y agoIf the state wins, I wouldn't be surprised if Lyft and Uber pulled out, or at least increased their fares by a substantial amount.
- navigatr 7y agoThey'd lose out on a huge market where there are already competitor apps to both Lyft and Uber.
- Accujack 7y agoClosing the loophole in the law that lets them treat workers as "contractors" rather than employees is going to torpedo their whole business model.
- microtherion 7y agoIn my book, it's not a "business model" until it's consistently profitable.
- jdhn 7y agoI'm not sure why people think that drivers for Uber & Lyft shouldn't be treated as "contractors". I know I'm in the minority on this, but to me it seems that you can jump in and out of employment with Uber & Lyft quite easily, to the point that it does seem more like contract work. As an anecdote, I took a Lyft to the airport with someone who had stopped driving for 6 months in order to get started with a new full time job, and had just started driving again to pick up a little more cash on the side. No full time employer would tolerate a 6 month break to start up another job, and then allow you to come back.
- 8note 7y agoMy current full time employer would be fine with that -- specifically withing 6 months, I'd keep my RSU grants too
- fungiblecog 7y agoContractors can set their own rates. These drivers are employees.
- gwright 7y agoYour conclusion presupposes that the employee/contractor dichotomy is a useful construct in its typical form. But the current dichotomy limits the freedom of individuals to contract out their labor on terms that work form them. It replaces the free choice of individuals with the "wisdom" of bureaucrats and politicians.
- listenallyall 7y agoTaxi drivers don't set their own rates. What's the proper categorization?
- turc1656 7y agoThe taxi analogy isn't the same. The rates are being set by the local government, not some non-government third-party whom they work with like perhaps the people who actually own the medallions (most are loaned out) or the people who lease out usage of the vehicles, etc. If those places were setting rates on what could be charged then I'd say there's an argument to be made. Also, let's not forget why the government put in those rules on setting the rates in the first place - consumer protection. Cabbies were routinely ripping people off. Furthermore, it's not just one thing. It's a set of criteria/tests that for certain states like CA and NJ are defined in the law. Taken in aggregate and not just on one single characteristic of the employment a determination can be made.
- mikepurvis 7y ago... is that bad?
- deleted 7y ago[deleted]
- Koremat6666 7y agoPersonally I think they should pull out nevertheless and make an example out of NJ. That should give enough signals for other lawmakers not to come between consenting parties.
- navigatr 7y agoThere are plenty of competitors in NJ chomping at the bit to eat Uber and Lyft's lunch.
- greenyoda 7y ago> make an example out of NJ If Uber left, it would look more like NJ made an example out of Uber. Other states would see NJ's success in beating down Uber, and might be inspired to tighten their own labor law enforcement. Also, Uber would be leaving behind a very lucrative market in NJ: it's the 11th most populous state, 3rd highest in income,[1] and a large part of its population is in the NYC metro area (high population density, lots of rides to commuter trains, etc.). [1] https://en.wikipedia.org/wiki/New_Jersey https://en.wikipedia.org/wiki/New_Jersey
- deadmetheny 7y ago"We should just let corporations do whatever they want"
- lend000 7y agoI wonder how many people have this opinion just to stick it to "the man" -- seems like most of the anti-Uber HN crowd does not actually drive for Uber, but nonetheless express a passionate hatred for their business model.
- wnevets 7y agoor they could just follow the law?
- username90 7y agoIn 2015 Uber made 9 million rides in New Jersey, and the article said they were ordered to pay $50M in employment taxes in that year, so drivers would be forced to give up $6 per ride extra in taxes. I don't think the drivers would want this. In order to make the taxes not ridiculous Uber would be forced to start declining people who want to start riding, you'd have job interviews with an application process ensuring that the driver is going to be worth the significant employee tax, since a driver only driving a single time will cost them significant amounts. That is how normal businesses do this, and I think it would be a huge loss. The ability for anyone to just start driving for Uber with no questions asked is extremely progressive, not sure why anyone is trying to ruin that. I don't understand why people think that making money needs to be so controlled like it is today. Source on number of rides in New Jersey: https://eu.app.com/story/news/traffic/commuting/2015/11/12/uber-nj-rides/75605804/ https://eu.app.com/story/news/traffic/commuting/2015/11/12/u...
- wnevets 7y ago> so drivers would be forced to give up $6 per ride extra in taxes. how is this different than anyone else who has to work in the state? You can replace drivers with almost any other job. Why should uber drivers get special treatment when its comes to paying taxes?
- atonse 7y agoThat's ok. They're welcome to pull out. But they won't. Time and time again we see that business rather just raise their fares and make money than pull out of large markets. They are after all money-driven.
- kazen44 7y agoThe brussels effect[1] is a good argument for this. People said the same thing with GDPR, labour laws and enviromental laws. [1] https://en.wikipedia.org/wiki/Brussels_effect https://en.wikipedia.org/wiki/Brussels_effect
- atonse 7y agoWow this (and the similar California effect) are a great name for exactly the "feeling" I was talking about. I'll use this from now on. Thanks. California's done this with emissions.
- mtnGoat 7y agoas long as there is a penny to be made, someone will make it. If Uber leaves another will fill the gap. I don't feel that regulation generally stifles business, only margins.
- throwawayhhakdl 7y agoI don’t know why this is downvoted so much. If the state wins, Uber will absolutely have to either pull out or raise fares. And I would think pulling out might make more sense because the difficulty of accounting for some drivers as employees and some as contractors would be extremely punishing.
- navigatr 7y agoJersey City just had a public referendum on short-term rentals that AirBnB spent millions of dollars lobbying against. It's good to see that the both the public and its elected officials are coming up to speed on the realities companies like Uber and AirBnb force upon them by skirting the law.
- toomuchtodo 7y ago> Jersey City just had a public referendum on short-term rentals that AirBnB spent millions of dollars lobbying against. Lobbied against and still lost by an enormous margin (70 percent of voters supported the new regulation). https://www.nytimes.com/2019/11/05/nyregion/airbnb-jersey-city-vote.html https://www.nytimes.com/2019/11/05/nyregion/airbnb-jersey-ci... https://news.ycombinator.com/item?id=21459486 https://news.ycombinator.com/item?id=21459486
- navigatr 7y agoYep, nearly 70% of voters voted against allowing short-term rentals. AirBnb spent over $4 million on that local election alone[1]. [1] https://www.cnbc.com/2019/11/06/airbnb-suffers-setback-in-jersey-city-on-vote-to-regulate-rentals.html https://www.cnbc.com/2019/11/06/airbnb-suffers-setback-in-je...
- toomuchtodo 7y agoProof that voting works (IMHO). Local residents won against a distant corporate entity.
- ta999999171 7y agoProof that it can. AirBnB aren't top competition.
- Shivetya 7y agowell preying on ignorance is the game of politicians and they won. Yes I am saying it was a loss for the rest of us. why? politicians and their allies successfully portrayed the home sharing industry as the reason for rising rents when in fact it has long been because politicians and those using their connections which have been the cause. oh they hide it well but the idea is to keep their investments up and keep "those" people out. Those people being any group which they don't want to see where they live. If you got this far, good for you. Are there bad actors in the home sharing space. Yes, however you target them more directly but the restriction of requiring owners to be on site during the rental period severely limits the rights of the good ones. so yes there is some regulation needed but if it does not protect the little guy, and they weren't in this as they got rolled in with the rest, then it harms us all as whole. rents won't go down until more units are built and they won't be built for the same reasons they were not being built before home sharing industries showed up at the door.
- jacquesm 7y agoLooking forward to seeing a repeat here in NL.
- mherdeg 7y agoIs the limited-liability corporation that Uber uses called "Raiser LLC" or "Rasier LLC"? I swear I've seen it spelled both ways, although only "Rasier" in Uber receipts. What's the etymology?
- lwf 7y agoBoth, although it's possible it's only "Raiser" in some locales[1] as a typo — Uber's liability insurance paperwork[2] and site[3] refer exclusively to "Rasier". [1]: http://tsa1.nv.gov/ActiveCertificatesDetail.asp?cCertNum=TNC+0002 http://tsa1.nv.gov/ActiveCertificatesDetail.asp?cCertNum=TNC... [2]: https://ubernewsroomapi.10upcdn.com/wp-content/uploads/2019/02/NY-COI-P1-3-Phys-Dam.pdf https://ubernewsroomapi.10upcdn.com/wp-content/uploads/2019/... [3]: https://www.uber.com/global/en/cities/washington-dc/ https://www.uber.com/global/en/cities/washington-dc/ There's at least one document[4] where Rasier LLC forms a subsidieary `Raiser-CA, LLC`. [4]: https://www.vice.com/en_us/article/9kwjz5/unicorn-trank-and-raiser-the-names-uber-uses-to-do-business https://www.vice.com/en_us/article/9kwjz5/unicorn-trank-and-... , specifically https://video-images.vice.com/_uncategorized/1500911986571-Screen-Shot-2017-07-24-at-114249-AM.png?resize=1050:* https://video-images.vice.com/_uncategorized/1500911986571-S...
- mnm1 7y ago> It’s not clear whether the company ever paid any of that bill. What's the point of these fines if NJ and other governments have no real power to enforce them? This seems to be all for show. Sure, we throw poor people in jail over a $20 fine. But Uber doesn't pay tens of millions and nothing at all happens to them. It's impossible to see this as anything other than separate justice systems for the rich and poor. If Uber was a real person, they'd probably be in jail for life. If they weren't white, they'd be sitting on death row. Instead, we talk of them as if they are some sort of success: a company breaking laws and hemorrhaging money with no chance in fucking hell of ever being profitable.
- nemo44x 7y agoThere's no escaping this from states like NJ, CA, IL, MA, and NY. These states (of which I am a member of) are broke with pension obligations waiting to bankrupt the government. Taxes are already high both on income and property so there's nowhere to go there. They have old infrastructures and although the citizens are heavily taxed, government can't make improvements in large part because of lifetime pension obligations to a rapidly growing group of retirees - many of which have already moved to tax free states like FL. So these states are the vanguard in finding ways to collect more tax revenue any way they can. Sharing Economy companies are simply the easiest to harvest right now.
- jacquesm 7y agoNo, sharing economy companies are breaking the law in interesting and creative ways and it has simply taken the states some time to catch up. That those states also have a pension obligation has nothing to do with them collecting taxes on corporations active in their territory.
- iscrewyou 7y agoSeriously. These corporations come up with all kinds of ways to not pay taxes and then people try to find a fault in the government or the system. Yet, when the government comes back to acquire those taxes, it’s still the government’s fault?
- nichos 7y agoThe government has been proven to be irresponsible with my money, I don't object to Ubers position here.
- deleted 7y ago[deleted]
- akersten 7y agoDo you have some numbers to share to support the hypothesis that pension plans will bankrupt these states without new taxes?
- deleted 7y ago[deleted]
- bandrami 7y agoI mean, I used to get tech support gigs on Craigslist all the time. Should Craigslist have been responsible for paying me minimum wage during that time?
- navigatr 7y agoI didn't know Craiglist determined your rates and claims to own the relationship between you and your clients.
- moreorless 7y agoHow much commission did CL made from these gigs you did?
- mtnGoat 7y agoi cant even make the logic jump to compare these too. Uber isn't just a place people post about needing rides and then pick from one of the respondents. hardly comparable.
- fortran77 7y agoIf these Uber drivers were correctly reporting their income (and I can't see how they wouldn't be--Uber surely 1099s it) -- wouldn't each individual driver be paying these same taxes, even as a self-employed person? The self-employed pay into Social Security for both their portion and the employer's portion, this also includes SSDI. I'm not sure how NJ does their state tax calculation.
- Shivetya 7y agoI am really curious how they arrived at any of the numbers in this article. Seriously, what other large employers make it to hundred plus million per year? Are they just up and deciding that anyone who did one trip is now an employee? Is there a source that shows how much each company pays per year in this state? who else is equivalent? this isn't about protecting the drivers, this is about protecting the taxi industry and metropolitan mass transit unions both of which were under threat of better service being offered at lower costs both to tax payers as a whole as well as customers. you don't have to like Uber to understand what this is really about. It is protecting the current gravy train the politicians rely on to stay in office. edit: https://www.njbia.org/get-njbias-tax-changes-for-2019/ https://www.njbia.org/get-njbias-tax-changes-for-2019/ Unemployment Insurance, New Jersey Workforce Development and Health Care Subsidy Fund Taxes > Employee and employer state Unemployment Insurance tax rates will apply to the first $34,400 of an employee’s earnings in 2019 (up from $33,700 in 2018). > For 2019, employees are subject to a 0.0425% (.000425) Workforce Development Partnership Fund tax rate. The employee Unemployment Insurance tax rate remains at 0.3825% (.003825) of taxable payroll.
- Retric 7y agoThis must mostly be penalties for not paying any taxes for 4 years. Unemployment in New Jersey is taxed at 0.3825% of the first 34,400$ of income so it cap’s at 132$/employee per year. The other tax is uncapped but at ~1/9th the rate. Nationwide Walmart has 2,300,000 US employees. If they are paying an average of 150$ each nation wide on similar taxes that’s 345 million per year. However, I doubt even 20 million of that is in New Jersey.
- throwawayhhakdl 7y agoIt’s 120 in interest and fines. The rest accrued over four years
- IanCal 7y ago> Uber and subsidiary Rasier LLC were assessed $523 million in past-due taxes over the last four years, the state Department of Labor and Workforce Development said in a pair of letters to the companies. The rideshare businesses also are on the hook for as much as $119 million in interest and penalties on the unpaid amounts, according to other internal department documents. Also it's unemployment + disability insurance they're being charged for.
- GrumpyNl 7y agoI still dont get why a cab driver must get a cab driver license and a uber driver doesnt. Same service, just another name.
- ars 7y agoUber is legally limousine service, not cab service. i.e. hired not flagged on the street.
- pitaj 7y agoPlease don't quote with code blocks. It breaks formatting by forcing horizontal scrolling, and is especially bad on mobile. Requoted: > Employee and employer state Unemployment Insurance tax rates will apply to the first $34,400 of an employee’s earnings in 2019 (up from $33,700 in 2018). For 2019, employees are subject to a 0.0425% (.000425) Workforce Development Partnership Fund tax rate. The employee Unemployment Insurance tax rate remains at 0.3825% (.003825) of taxable payroll.
- andy_ppp 7y agoThe annoying thing is it’s 5 lines of css to fix in most browsers... https://css-tricks.com/snippets/css/make-pre-text-wrap/ https://css-tricks.com/snippets/css/make-pre-text-wrap/
- pitaj 7y agoYes except that breaks actual code, especially affecting mobile devices where wrapping can make it very difficult to follow.
- andy_ppp 7y agoIt doesn’t actually break code, it just wraps it on mobile devices differently. Make your window bigger (80 chars) if you want to see full lines. For mobile it’s still more readable than horizontal scrolling code.
- pitaj 7y ago> It doesn’t actually break code, it just wraps it on mobile devices differently. I meant it breaks the flow of the code by inserting line breaks. > Make your window bigger (80 chars) if you want to see full lines. For mobile it’s still more readable than horizontal scrolling code. Not all code uses 80 as the standard, many use 100 instead. Regardless, it is not at all true that wrapping is more readable than horizontal scrolling. Wrapping doesn't obey the indentation of the surrounding context.
- deleted 7y ago[deleted]
- kfichter 7y ago> Implying wealth taxes aren't sane
- throwaway35784 7y agoOr it could be about protecting employee rights against exploitative corporations who flout the law for profit. Edit: and society for that matter. See Al Capone, a murderer, being finally arrested for tax evasion as an example.
- jdnenej 7y agoNah it's ok. Everyone here lives in a privileged position where they will never end up working less than minimum wage for uber so the only thing that matters is a slightly lower cost no matter what the cost to others is. Also uber is a hip and trendy startup so they can do no wrong!
- reroute1 7y agoWhat a pointless comment. It's just a bunch of sarcasm with no information. I was doing part time delivery while freelancing a couple years ago. Please post something substantive not this junk.
- scarejunba 7y agoSo I get it. The comment is being sarcastic. But the value is pretty low, right? It's just "I agree with you and here's a poor rendition of arguments opposing so that we can make fun of them". I get it's useful because stuff like that is great in-group signaling and builds bonds but perhaps it's not really that useful when discussing?
- subsaharancoder 7y agoCurious, in which world has taxation ever been for the benefit of the employee?
- alistairSH 7y agoIn the world where ex-emoloyees collect unemployment insurance benefits when SuperMegaCorp lays them off.
- deleted 7y ago[deleted]
- paulie_a 7y agoIn guessing they will just get another round of investment when running an illegal taxi business at scale...I mean disrupting. Oh well I don't mind the subsided rides. The drivers have been very pleasant and I'll hate going back to cabs when this came party ends
- kd3 7y agoAnother great example of the government mafia stifling innovation and trying to extort and rob everyone at every opportunity. Government is the big iron ball attached to our foot holding us all back.
- xiphias2 7y agoÜber was just much more lucky / smart on its IPO than WeWork, as VCs could get rid of their overvalued assets before the company was started to be regulated like a normal company.
- droithomme 7y ago> The money that they’re not paying into the unemployment and disability systems is being picked up by the states and the taxpayers. Isn't it true that independent contractors are not eligible for unemployment or disability claims? Yes that's true. Given that, it is false that the "cost" is being picked up by others, because there is no cost here. And given that the state is seeking retroactive reimbursement for past years, all independent contractors in the state who worked at this during this time period should be retroactively reimbursed for times of unemployment and for disability issues. Odd the state's not offering that.
- howard941 7y agoThe state would beg to differ: "..the department also has determined that 65 drivers who listed Uber, Rasier or Lyft as their employer in unemployment-insurance-benefits claim forms are employees of those companies and therefore eligible to seek jobless benefits."
- TheMagicHorsey 7y agoEven though Uber will eventually be ruined by the bad press, we should all appreciate what they did. The taxi industry was an overregulated high-rent business dominated by insiders, delivering shitty service at high prices, and nobody was able to break into it. Uber broke that and introduced people to what is possible with the free market. Now the government can't just go back to its corrupt ways. People will notice if service degrades. I hope Lyft, Uber, and others are driven out of some markets just so we can see if there's a backlash against the unholy union of government, left-wing unions, and taxi cab companies. I feel like people should be reminded about what the government and taxi cab union dominated market was like with their hedgefund insider deals (to purchase medallions) and other corrupt dealings. People always assume decapitating Uber will bring an utopia ... they should be reminded about how corrupt government is when nobody is watching (and people usually aren't watching).
- ChuckMcM 7y agoOk, is it just cynical of me to say "Ok, here is their 'one time expense' for this quarter to show why they aren't profitable yet? That said, the company has so much regulatory risk associated with it. It has the feel that the "system" is working very hard to punish the "disrupter" in a fatal way to discourage other such disrupters.
- ganitarashid 7y agoThis is not Uber's real problem. The much bigger problem is that Uber's business model by definition cannot be profitable, and here is why: Let's start with the costs of the business model. What are the two costs involved in transporting a customer from point A to point B? They are: - The car’s time - The (human) driver’s time Operating or leasing a car for a certain amount of time (maintenance/insurance/gasoline) has not become significantly cheaper since Uber was created, so there is no cost reduction here. Hiring a human's dedicated time (at least minimum wage) has also not become significantly cheaper since Uber, so here too there is no cost reduction. Therefore the cost to transport something from point A to B has stayed exactly the same, before Uber and after Uber. To transport something from point A to point B, someone must still carry this unavoidable cost. If the customer is not carrying this cost, then Uber must be carrying it. Uber can do so for now because investor money has subsidized the cost. But Uber can’t do this forever because investors will lose patience and stop the subsidy. Uber can only be profitable once the unavoidable cost transport is passed on entirely to the customer. At that point, Uber will have to charge the same price as any taxi. Stated differently, Uber can never be more profitable than a taxi company on a per-ride basis. Given that customers have no loyalty to a ride-share service, because every ride is virtually identical, any taxi company can build a similar service, removing any "walled garden" or "network effect" Uber may have hoped for. In fact, Uber clones are doing well in other countries and are creating significant headwinds for Uber. Uber therefore has no hope of ever delivering its promises unless it can deliver driverless cars. Even if it can do that, the technology will quickly become commoditized and ubiquitous, meaning that any other ride-share service could offer it as well, once again removing any advantage, and driving margins for all ride-share services to near zero.
- ganitarashid 7y agoI know Uber shareholders do not like to hear this.