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Uber drivers are 'independent contractors.' Here's how tax reform can settle the issue

  • The tax code hasn't been updated since 1986, that's before Google, Facebook and Uber.
  • To really modernize the tax code, the GOP tax reform bill must address Uber drivers, Task rabbits and others in the gig economy.
  • The New Gig Act, introduced by Sen. John Thune and Rep. Tim Rice, would make it clear that sharing economy workers are independent contractors.
Uber driver picking up customer
Al Seib | Los Angeles Times | Getty Images
Uber driver picking up customer

As a diehard Mets fan, I can tell you with far too much pain and aggravation how long it's been since 1986. In the thirty-one years since the Mets have failed to win another World Series, Congress has also chosen not to meaningfully update the tax code. So while tax reform still may not be quite as rare as a championship in Flushing, whether you like or hate the current GOP proposal, modernizing the tax code is an opportunity that doesn't come around very often.

The world has changed a bit since the heyday of Mookie Wilson and Keith Hernandez. We didn't have iPhones back then. No Netflix. No Google. No Facebook. No Amazon. No internet at all in fact. And certainly no sharing economy.

Whether it's Handy, Uber, Lyft or any of the hundreds of startups connecting people who need a service with people who can provide a service, 45 million Americans (one in five adults) have now worked in the sharing economy (that number is projected to grow by another 20 percent over the next three years alone).

The sharing economy has radically changed both the way we work and the way our economy functions. And everyone who works in the sharing economy has to deal with an outdated tax code that never even imagined the existence of this type of work or this type of approach in the first place. That needs to change.

That's why lawmakers need to ensure that the tax reform bill includes the New Gig Act proposed by Senator John Thune and Congressman Tim Rice. This addition would make it clear that sharing economy workers are independent contractors who are free to come and go as they please, accept or turn down work as they please, and work for as many platforms as they want. Tens of millions of people have chosen to work in the sharing economy mainly because of its tremendous flexibility. That appeal is what drives these platforms. It needs to be codified in law and the New Gig Act finally does that.

"The sharing economy has radically changed both the way we work and the way our economy functions. And everyone who works in the sharing economy has to deal with an outdated tax code that never even imagined the existence of this type of work."

The Act reflects where our country's economy is going and that's why leading companies like Handy, Instacart, Glamsquad, Saucey, DoorDash and Postmates have all publicly thrown their support behind it. Together, these companies connect thousands of Americans to new work opportunities every day.

Why does this really matter? Imagine you drive for Uber, Lyft, Gett and Via. Right now, you're issued 1099 forms through each platform. They don't withhold taxes for you, so you have to do it yourself. You've got to figure out estimated quarterly tax payments, which means you're probably hiring an accountant – or, in many cases, you're just ignoring it altogether.

At best, people who are already really busy have to spend time and money to appease the IRS (it's supposed to be the other way around: the people don't exist for the good of the government – the government exists for the good of the people). The sharing economy is only going to grow. More and more people are going to take part in it. Why wouldn't we devote one small part of tax reform to making the lives of its participants a little bit easier?

That's exactly what Thune and Rice are trying to accomplish. The bill makes it clear that people who work in the sharing economy are legally entitled to all of the rights and flexibility of independent contractors. It makes tax filing a lot easier by allowing for withholding and it makes compliance a lot more likely by ensuring the IRS is notified by sharing economy platforms of earnings above $1,000, which collectively means billions of dollars in new tax revenue that currently goes unreported and unpaid.

Whether you're a Democrat looking to spend more on health care or education or a Republican who wants to see lower taxes without sending the deficit skyrocketing, new revenue that also makes life easier for the people paying it should be the one thing we can all agree upon in this bill.

The world has changed a lot since 1986. Ensuring that at least one piece of tax reform actually goes to addressing the ways our economy has evolved and helping the people who participate in it seems like something anyone should be able to get right.

Commentary by Bradley Tusk, the founder and CEO of Tusk Ventures, the first venture capital fund to work with and invest solely in high growth startups facing political and regulatory challenges. Previously, Tusk served as campaign manager for Mike Bloomberg, as Deputy Governor of Illinois and as Communications Director for Senator Charles Schumer. His foundation Tusk Montgomery Philanthropies is working to bring mobile voting to US elections. Tusk writes a regular column for Inc and The Observer and hosts a podcast called Firewall. Follow him on Twitter @BradleyTusk.

Disclosure: Tusk was an early investor and close advisor to Uber. He is also an advisor to Handy and Glamsquad.

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