56 percent of the independent contractors who are most likely to be reclassified under a national ABC test, or about 7.7 million workers, would pay higher taxes under their new employment status.
Of these workers facing higher tax bills, 96 percent also earn less than $400,000 per year, meaning approximately 7.5 million Americans earning below that amount would see their taxes raised.
The PRO Act supported by Democrat presidential candidate Kamala Harris would raise taxes on middle income households and violate her pledge to not raise any tax on anyone earning less than $400,000.
How?
The PRO Act would force millions of independent contractors into W-2 employee status––or out of work entirely––by codifying a vague, three-factor test known as the “ABC test” for determining employment classifications.
Americans for Tax Reform and the Tholos Foundation commissioned a study in 2022 analyzing the tax effects of implementing an ABC test on a nationwide basis. According to the study, millions of Americans would end up paying higher taxes if Harris is allowed to enact her radical reclassification plan.
Using the most up-to-date government statistics at the time of the study, 56 percent of the independent contractors who are most likely to be reclassified under a national ABC test, or about 7.7 million workers, would pay higher taxes under their new employment status.
Of these workers facing higher tax bills, 96 percent also earn less than $400,000 per year, meaning approximately 7.5 million Americans earning below that amount would see their taxes raised.
Worse yet, the study indicates that more recent data on the gig economy could mean tens of millions of Americans would pay higher taxes. For example, extrapolating the results of the study to other national freelancing data collected by Freelance Forward would mean that as many as 33 million Americans could face higher tax burdens as a result of ABC test reclassifications.
Independent contractors already pay taxes but the Harris-forced reclassification will result in a different mix of taxes that increase the overall tax burden for many workers.
Read the study details of the tax treatment of independent contractors vs. employees here.
Below: Table 1 from the study:
The PRO Act, or “Protecting the Right to Organize” Act, is a grab-bag of leftwing policies to empower union bosses at the expense of individual workers. The bill would ban right-to-work laws nationwide, violate workers’ rights to secret ballot elections, allow union bosses to gain the private information of workers, and codify a joint employer standard which would destroy small businesses that rely on the franchise model.
As a Senator, Harris was an original cosponsor of the PRO Act in the 116th Congress.
Harris also backed an onerous California state law known as “AB 5” which imposed an ABC test at the state level.
Last week, Harris again reaffirmed that she is in favor of the PRO Act and its provisions, including the restrictions on independent contractors.
If elected, Harris will take workers’ choice away and raise taxes in the process.
Stay tuned to ATR’s Kamalanomics.org for updates.