The Illogical and Misguided War on Independent Contractors

It is well understood to be a fundamental right that when two parties come together, with one person asking the other person to perform lawful services in exchange for payment, the two should be free to decide among themselves how that arrangement is structured, right?

Not so fast.

The Obama Administration believes that depending on the level of oversight, among other items, exercised by the person who will make payment, the person being paid MUST be treated as an employee for federal tax purposes.

President Obama's proposed 2011 budget suggests tough times ahead for employers who rely heavily on independent contractors in order to keep down labor costs.

If the budget is approved, the IRS will add 100 new enforcement personnel as part of a $25 million plan to crack down the misclassification of workers as independent contractors."

The reasons for the heightened attention of the federales on this issue are not altruistic. Forcing these arrangements to be treated as employer/employee can result in much more tax revenue pouring into Washington DC.

"In 2000, Microsoft had to hand over nearly $100 million in taxes, missed payments, and penalties."

This very issue is what drove Joseph Stack over the edge when he crashed his Cessna into the IRS' offices in Austin, Texas a couple of months ago.

This is yet another example of an over-arching federal government attempting to dictate to Americans how to conduct business. The fact that the Obama Administration is heavily populated with people who have never actually run a business makes this incredibly ironic but no less frustrating and troubling.

At a time when employers are reluctant to add more headcount due to cost concerns, adding this issue as another reason not to bring in more labor is nonsensical.