Tax season is stressful for everyone, but this time of year is particularly difficult for the millions of Americans working in the gig economy. Delivering meals, driving ride-hails, walking dogs or any of the countless other tasks that make up the gig economy provides the flexible schedules and dependable incomes that modern, mobile, independent workers want — but it comes with tax headaches that are frustratingly old fashioned. Thankfully, there are important new efforts in Congress and in state capitals to bring the tax code into the digital age, and advance an important conversation on how to shape the future of work.
Right now, gig workers face onerous requirements to make estimated payments to the Internal Revenue Service throughout the year, pay self-employment taxes and figure out complicated deductions for themselves. As a result, many workers get hit with penalties and the government misses out on significant revenue – billions of lost dollars, according to one federal audit.
At Postmates, an on-demand marketplace where you can get local goods from local brick-and-mortar retailers delivered right to your door by local drivers, we’ve heard from our fleet community that the uncertainty and complexity around taxes is a major source of anxiety and economic uncertainty. We’re constantly looking for innovative ways to make things simpler and more efficient for all our workers. That’s why we unveiled tools like “instant deposit” that allow our workers to access earnings within minutes of fulfilling deliveries, an important alternative to payday or predatory lending. But no company can solve the problem of outdated tax laws by ourselves. We need far-sighted elected officials at all levels, companies focused on long-term value — not just short-term profit — workers and labor unions all working together to write new rules for the new economy.
There are a number of proposals on the table that deserve serious consideration.
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First, there’s the New GIG Act, which was just reintroduced by Senate Commerce Committee Chairman John Thune (R-S.D.) and Rep. Tom Rice (R-S.C.). It would end many of the tax woes facing gig workers. The bill would ease the burden of record-keeping currently falling on workers by requiring platform companies like Postmates to issue a Form 1099 to everyone earning at least $1,000. Companies also would withhold 5 percent of gig workers’ gross earnings, which would free most workers from having to calculate and pay estimated taxes throughout the year. The details can and should be debated, but these reforms are in line with other tax simplification proposals, including from the Aspen Institute’s Future of Work Initiative, and would make life easier for workers, companies and the IRS.
Significantly, the New GIG Act also would clarify the criteria for determining who’s an independent contractor and who’s a full-time employee, particularly as it relates to benefits. At Postmates, 80% of fleet members work on the platform just three to five hours per week because they also have other jobs or are students, retirees, stay-at-home parents or freelancers. Helping them and other gig workers clear up their status would reduce confusion and open the way for exciting new models benefits. This goes beyond tax certainty. The future of the gig economy depends on finding innovative ways to balance worker voice and worker flexibility, to reflect the modern way we live and work.
Second, on the topic of benefits, Sen. Mark Warner (D-Va.) and Rep. Suzan DelBene (D-Wash.) have introduced the Portable Benefits for Independent Workers Pilot Program Act, while other bipartisan measures have also spurred conversations on ways to expand access to training, lifelong learning and home mortgages for gig workers. Their plan would award $20 million in competitive grants to fund experimentation in portable benefits programs for independent workers. At Postmates, we’ve already launched a series of new experiments. We’re piloting new health savings tools, enrolling thousands of members of our fleet under the Affordable Care Act, and making it possible to direct deposit earnings and tips instantly rather than wait for a weekly paycheck. But this is just the beginning. We’re partnering with labor unions to think more broadly and creatively about the future of benefits, and legislation like this would turbocharge these efforts.
Third, state leaders such as Govs. Gavin Newsom (D-Calif.) Jay Inslee (D-Wash.) are bringing together policymakers, companies, unions and other organizations that give workers a voice to make recommendations about the future of work and the gig economy. These are important efforts and Postmates is committed to engaging fully and thoughtfully. I believe tech leaders have a responsibility to step up and help shape a new economic compact that preserves the flexibility and creativity that makes the gig economy so appealing while ensuring all workers get a living wage, good benefits and control over their own economic destinies.
So when you file your taxes this year, spare a thought for the gig worker who delivered your dinner or gave you a ride to the airport and will go home to a mountain of daunting paperwork. Our current tax and employment laws are based on economic models from a bygone age. Americans work today in ways our parents and grandparents could never have imagined. It’s time for the rules to catch up.
Vikrum Aiyer is vice president for global policy at Postmates.
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