IRS “Safe Harbor” Allowing Tax Cheating and Wage Theft

Contact Workers at the Smithsonian protest in 2013

Contact Workers at the Smithsonian protest in 2013

New Orleans          It’s not news that wage theft and the problems of mis-classification of workers as independent subcontractors is rampant.  What I had not realized is how much of it was allowed directly by Congress and lax enforcement by the IRS.  You think you know the whole score, but it was not until I was reading the tail end of a story developed as part of a longer series by McClatchy news service’s Washington Bureau that I got a better handle on how easy it has been for employers to get away with this mischief.

The story’s slant was the IRS and tax cheats, rather than workers and wage theft, but it adds up to about the same thing, just double trouble.  McClatchy probably just figured the article would attract more readers if it was slanted towards tax scofflaws, rather that workers being ripped off yet again.  Just keep in mind that when workers are misclassified not only does the government not collect the state and federal withholding taxes, but the worker also doesn’t have Social Security paid on her hours or unemployment insurance and workers’ compensation paid in their behalf.   The tax cheating may be the government’s problem on the short run and worth billions, but the inability to retire with qualified hours worked, have a safety net during unemployment, or support when injured, hurts workers today, and puts them at the will and whim of the government both now and later as well, letting the corporations walk, whistling a happy tune all the way.

Interviewing Kim Bobo, executive director of Interfaith Worker Justice on Wade’s World, she had a simple definition that is easy to remember for whether or not a worker is truly an independent contractor.  You just ask, “Do you work for yourself or someone else?”  If they answer “yes,” to the first, then they are, and if “no,” then they aren’t.  That’s a bright line test.

It turns out though that during the Carter Administration and the recession then, Congress passed a law in reaction to a lot of business complaints that the IRS was hounding them to pay taxes on their workers which gave them “safe harbor” with a rule officially known as Section 530 of the Revenue Act of 1978.  Technically this was supposed to be a one-year temporary kind of deal allowing a company that had messed up and “misclassified” its workers as independent contractors to get its act straight and fly right.  Instead the loophole in the words of the McClatchy reporters has meant,

“Every year, billions of tax dollars are squandered in the United States because of a decades old loophole in federal law that allows tens of thousands of businesses to do the wrong thing – simply because they have been doing it all along…Under the safe harbor rule, the company just has to have a ‘reasonable basis’ for doing so.  Generally, companies must just show they’ve been doing it continually and that others in that industry do it the same way.”

So, the double bind is that the IRS has not enforced the section and neither has the Department of Labor.  The companies skate.  The workers are screwed.

We watched the movie, “Nightcrawler,” the other night where a fellow desperate for a job was offered an internship by the psycho and negotiated first $30 for a night’s work and then $75 for a raise, and essentially got a death sentence for then asking for even more for dangerous work.  This movie of amorality ends with three young people, now “interns” jumping into vans to work for this so-called “news” gathering service.  You might say, hey, but that’s in the movies, dude.   Unfortunately, similar scenes, perhaps less exotic and appealing, are duplicated for millions of workers in thousands of companies every day.  Come on, man!

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Progress on Payday Lending and the Digital Divide in Canada

10872772_10205576017666745_904929552335494071_oChicago     Like clockwork the ACORN Canada staff continues the tradition of mid-December YE/YB or Year End / Year Begin meetings.  Getting snowbound in Montreal one year and caught again another year in Niagara Falls, convinced them that perhaps meeting in the USA made sense, given that plane fares was actually cheaper.  Several years ago we managed to meet in Miami on the coldest day ever for that time of year.  The other advantage of such locations has been the opportunity to meet with organizations on the US-side and compare notes, pick up tips, and generally keep current in the work.  This year found the crew in mid-20 degree temps in Chicago.  Meetings with Kim Bobo, Executive Director of Interfaith Workers’ Justice, Lawrence Benito, the ED of Illinois Refugee and Immigrant Rights Coalition, one of the leaders in the fight for immigration reform, and Ed Shurna, executive director of the unique and activist Chicago Coalition of the Homeless should add spice to the meetings as well.

Listening throughout the day to the reports from the offices, it was clear 2014 had been another banner year for ACORN Canada.  Almost 7000 members of their 70,000 were full payers on bank drafts giving the organization almost $200,000 of steady dues income to power the program.  The likelihood of a federal election next year also provided a fertile field for discussion about how ACORN can bundle our issues and leverage the campaign.  I may not have been in the United Kingdom but it sounded like the same discussion!

Perhaps the most interesting measures of progress were found in listening to the reports from the offices where solid work on both local and national issues was yielding big wins.

Scott Nunn, reporting from British Columbia, detailed a breakthrough in a new, locally-based strategy to stem the advance of predatory payday lending operations.  After preliminary discussions the city council in Surrey passed a zoning restriction pushing such stores away and limiting the numbers possible in our neighborhoods almost preempting our campaign.  We are also engaged heavily in this fight in neighboring Burnaby, so they could be the next city to fall.

Shay Enxuga surprised everyone with a report from Nova Scotia, the newest ACORN Canada outpost, with details on discussions and negotiations with cable internet provider, Eastlink, who seem ready to not only implement our $10 internet access plan, but to extend the program outside of public housing to the general neighborhoods.

The likely April consideration of the internet access by the federal commission could find itself under real pressure by the Rogers telecom plan for access we had won earlier in Toronto and now the Eastlink breakthrough.  Telus had seemed to be moving in British Columbia, but has stalled.  ACORN Canada may see an opportunity to expand the fight for the internet to be regulated as a public utility in the north as well?

Ottawa continued to win the staff awards for activity and took the prize after spirited competition.  Toronto is leading with more work on an exciting initiative to increase the living wage.  The coming convention in June in Montreal should see ACORN Canada expanding the organization there in 2014 and meeting hundreds coming to make decisions for the organization.

I hated to have to leave the meeting early.  There’s great work happening in the north!

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