Taxing the self-employed
Lest anyone has missed it, there is a salutary new trend in the US that warrants the solid endorsement of all Americans. The issue: cracking down on tax cheaters who cost the federal treasury over $95 billion annually in lost revenue. President Reagan recently called for action against such unscrupulous individuals and firms in one of his Saturday radio broadcasts. Now Congress and the administration are considering legislation that would tighten tax disclosure and reporting requirements pertaining to self-employed workers.Skip to next paragraph
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The legislation, introduced by Sen. Robert Dole, would establish tough new penalties for firms that fail to provide required tax information on payments made to persons who are considered ''independent contractors,'' i.e., self-employed individuals. All told, millions of persons are included in this category, among them sales representatives, real estate brokers, door-to-door salespersons, physicians, insurance agents, some truckers, etc. What they all have in common is that, because they are not employees of a firm, they do not have taxes withheld.
For perhaps the great majority of these independent contractors, there is no question about honesty of disclosure on earned income. But it is obvious that some persons find the opportunities to underreport income too tempting - and hence deliberately underpay taxes. The Dole measure would make such crass dishonesty more difficult.
Congress should act on such a measure as expeditiously as possible. Unfortunately, because of political pressures from various self-employed groups, lawmakers back in 1978 imposed a moratorium on any rulemaking involving independent contractors. That moratorium expires June 30. There is no reason for an extension of that moratorium. Given the budget deficit, as well as fundamental questions of fairness in society, there are more than ample reasons for tightening the disclosure laws.
One key provision of the Dole bill should be strengthened, as proposed by the Reagan administration. Under current law, firms must report to the IRS amounts of $600 or more paid annually to self-employed persons. The administration wants that figure lowered.
The Dole bill is a logical step in going after tax dodgers. It would not in any way work against the great majority of self-employed persons who pay their fair share of taxes. But it would help to crack down on those persons who deliberately cheat the government - and the American public - and thus bring disfavor on self-employed persons in general.