This racket started when Section 1706 was slipped into the Tax Reform Act of 1986. This uniquely discriminatory section required anyone who is an "engineer, designer, computer programmer, systems analyst or other similarly skilled worker" to be classified by the Internal Revenue Service as an employee rather than as an independent contractor, which hundreds of thousands of tech workers were at that time.
If this is the problem why not attack it there rather than fiddle with fine tuning the resulting dislocation? You begin with examining why this classification was slipped in by the liberals. As Congress extends its control of the market through taxes and regulations, smart entrepreneurs find ways around them. In this case, employers were finding ways around ever increasing health insurance costs, brought about again by government through Medicare, and increasing FICA taxes which employers must pay half of. They circumvented this in a small way by laying off some employees and then signing them up at higher pay as independent consultants. This was win-win for everyone but the IRS.
In addition to losing the automatic deductions from employees' paychecks, the former employees could then write off all work related expenses from their taxes. The government then came up with the 15% self-employment tax on the consultants. However, this was based on the consultants net profit which, in turn, was reduced by the expense deductions. The government was losing control and losing tax revenues so they tried to remedy that by very narrowly prescribing what an independent consultant was. They did that with the bill Ms. Schlafly cites.
The proper solution is reduced regulation and reduced taxes. First, and foremost the SS scam must be stopped because it is eventually going to stop itself through insolvency. In reality, FICA is just an increase and extension of the income tax as SS payments are simply paid out of current tax revenues while the "trust fund" is just spent on pork out of the general fund.
Finally, when all is said and done, the market will correct itself. It always does and it always will. Labor is a commodity, or product, that is for sale just like iron ore, timber, and washing machines. Free trade in labor is just as valid as free trade on other goods and services. If continued or severe job loss causes the US not to be able to buy products then those who sell them will suffer also. That may bring about hard times, even a depression, but it will cause a correction to the imbalance.
Bump