We’ve previously made the case that the “ABC Test”, a proposal intended to overhaul our nation’s worker classification regulations, would make life much harder for workers and small business owners if it were signed into law. The ABC Test would effectively remove a worker’s choice and ability to identify as an independent contractor, and instead force these individuals to become full-fledged employees, stripping away the freedom and work flexibility they once enjoyed as contractors. That is, unless they aren’t laid off amid the transition.
A federally mandated ABC Test is an especially raw deal for Hispanic Americans, given their large labor presence in industries that rely upon the work of independent contractors.
Recent analysis from Americans for Tax Reform (ATR) has found the impact of a nationwide ABC Test is even more detrimental than previously thought. It is a direct threat to the Hispanic community and violates a major campaign promise made by President Biden not to raise taxes on the middle class.
The ATR analysis shows that the ABC Test:
- Impacts 59 million Americans that engage in freelance work or independent contracting
- Increases federal unemployment taxes by 5.4% per employee on small businesses in states that reject the ABC Test
- Increases state unemployment taxes for employers who must reclassify independent contractors as employees
- Violates President Biden’s pledge not to raise taxes on earners making less than $400,000 per year
Unable to sustain the increased costs of employees, small businesses would be forced to cut their partnerships with independent contractors, leaving workers far worse off than they were before. If that wasn’t enough, the new employee classification standard would also function as a tax increase on working-class Americans.
Despite President Joe Biden’s promise to the contrary, enacting an ABC Test would raise taxes on Americans making under $400,000 per year. And since the Hispanic community would already be disproportionately impacted by job losses, the tax increase would likely have an outsized negative impact as well. The ABC Test would rob Americans of their freedom to work as they choose, their employment opportunities, and their hard-earned income.