Four Senators Introduce Bill to Close Tax Loophole

Four Senators -- Barack Obama (D-IL), Dick Durbin (D-IL),Edward M. Kennedy (D-MA) and Patty Murray (D-WA) -- have introduced The Independent Contractor Proper Classification Act of 2007. This legislation is designed to protect workers and taxpayers alike from employers misclassifying their employees as independent contractors. This problem costs the government billions of dollars and denies the misclassified employees such things as overtime pay and worker's compensation.

When employers use this loophole, they are able to avoid paying employment taxes as well as workers compensation for the workers.
As a result, it is the misclassified worker who must pay higher taxes, because they are classified as self employed, even though they are not.

On the other side of the ledger, those employers who follow the rules end up paying higher federal and state payroll taxes. This puts them at a disadvantage against the ones who are misclassifying their employees and therefore have less expenses.

The Independent Contractor Proper Classification Act of 2007 will not only close the Section 530 loophole, but it will also allow the government to collect the taxes employers owe and it will also look at the need for more enforcement of the federal tax laws and the employment laws as well, with the aim being to identify the employers in our major industries who wrongly classify workers as independent contractors. It will also require greater cooperation between the two federal agencies that are most involved, the IRS and the Department of Labor when it comes to enforcing the law.

Senator Obama talks about the millions of Americans who go to work every day and play by the rules and the majority of employers who treat their employees the way they should with a decent wage and benefits. And the need to stop those who do not. He also thanked Senators Durbin, Kennedy, Murray and the members of the labor community as well as the trade associations for their support.