As Congress prepares to vote on a $3.5 trillion reconciliation bill, every American household should be on high alert because some Democrats want to take away the right to work.
Senate Finance Committee Chairman Ron Wyden (D-Ore.) is championing legislation to drastically reform America’s unemployment system. The bill would model our federal system after a California law that is so unpopular and poorly written that emergency action is required to avoid severely disrupting the state’s economy.
California’s failed economic experiment would be federalized under the Wyden Plan. To determine unemployment eligibility under his Plan, a stringent federal worker classification test is used. In addition, if states refuse to use the federal test, unemployment taxes in those states become punitive, rising to 5.4 percent per employee. The ultimate goal of this plan is to force independent contractors in all 50 states to become employees for the purposes of federal unemployment taxation.
Wyden considers his bill to be a “top priority,” but it has so far escaped public scrutiny. By failing to hold public hearings on the bill, supporters have avoided answering basic questions like why they are reducing opportunities for working families, raising taxes, and interfering with an individual’s right to choose how they earn a living.
Millions of American workers now work as independent contractors rather than as employees. This enables them to run their own small businesses with the freedom and flexibility to serve their customers however they see fit. The Wyden Plan directly jeopardizes this option.
If the plan is passed, countless businesses will be forced to pay new taxes in order to continue using independent contractors. These higher taxes would unnecessarily disrupt economic activity and would be a violation of Democrats’ pledge not to raise taxes on small businesses.
California Democrats, on the other hand, are well aware of the situation. In 2019, their state implemented the stringent ABC Test to convert millions of independent contractors into employees. Unfortunately, the California law’s results have been disastrous. After the law was passed, instead of businesses treating independent contractors as employees, tens of thousands of contractors lost their jobs.
California lawmakers issued more than 50 emergency exemptions to the law in order to repair the economic damage caused by this ill-conceived policy. Any law requiring so many exemptions would seem to be viewed as a policy failure that should not be repeated. But you’d be mistaken. It appears that imposing such a disaster is a good idea in Washington.
The Wyden Plan strengthens California’s flawed policy. However, if the plan produces the same results across the country as it did in California, it will cause widespread economic harm.
To avoid this, the Wyden Plan must acknowledge one simple fact: independent workers in all sectors of our economy are content with their decision to be self-employed. They do not want higher taxes, fewer options, or increased economic uncertainty.
According to the Bureau of Labor Statistics, 79 percent of independent contractors prefer their current arrangement to being an employee. According to a similar NAIFA survey of insurance and financial professionals, 95 percent of these workers who work as independent contractors want to stay that way.
Given these overwhelming preferences, Washington would be wise not to disregard these workers’ wishes. Washington’s policies should improve the lives of America’s working families and small businesses, which are the backbone of our communities, rather than taking their jobs or taxing them out of existence.