Modernize The Damn Tax Code, So We Freelancers Aren't So Screwed
Working as a freelancer isn't some odd passing trend. It's increasingly the employment of today. However, the tax system screws freelancers.
Op-ed in the LA Times by Sara Horowitz:
Because the system is so complicated, freelancers often pay not only their taxes, but also penalties for miscalculating or missing their quarterly payments. And because freelancers can rarely catch their breath, setting aside retirement or any kind of savings becomes all the more challenging. In a 2016 survey commissioned by the Freelancers Union, independent workers reported that debt was among their top three concerns. In part for this reason, Silicon Valley is pouring billions into developing software that emulates withholdings and automates tasks like expense-tracking and invoicing.
But the real rub is that freelancers are paying taxes toward a social safety net to which they have little access. Many pay both employer and employee contributions to Social Security, yet are ineligible for unemployment benefits and workers' compensation.
Freelancers who make just enough to receive little or no subsidy for their health insurance are arguably the most penalized. Though they usually live in expensive urban areas, they may bring in only $35,000 or $40,000 a year, and are often subject to unpredictable swings in income that make them highly susceptible to debt.
Say you're a freelancer making a net income of $40,000. You would pay roughly $5,000 in self-employment taxes, $3,500 in income taxes and $4,500 in health insurance. That's 30% of your income. Compare this to a traditional worker with the same salary. Such an employee would pay 9% to 15% in taxes and health insurance payments, depending on what portion of the insurance is covered by the employer. They would also have access to group-rate benefits at a fraction of the cost an independent worker would pay.
Of course, another thing that makes no sense is how health care is tied to the workplace at a time when few people stay in the same workplace for long.
Sadly, it seems no legislators bothered to check for that when they were passing Obamacare to see what was in it.
This country is increasingly a complicated mess with government employees being among the better paid. I'm not seeing reasons for optimism, save for the world of technological innovation and entrepreneurs -- that is, those whom the government doesn't manage to squash.