Three tax bills that stalled in the Senate Finance Committee after they were introduced last year are being revived as possible relief measures for the coronavirus pandemic.
Speaking on the Senate floor June 4, Republican Whip and taxwriter John Thune of South Dakota said the bills, all of which he introduced, could aid families and businesses without adding to the national debt.
The bills involve simplifying income tax collection for individuals who work in more than one state, establishing rules for digital goods and services taxation across multiple jurisdictions, and creating a safe harbor for gig economy workers to qualify as independent contractors. All three have been introduced in previous Congresses but have fallen short of enactment.
The Mobile Workforce State Income Tax Simplification Act of 2019 (S. 604), which has 38 cosponsors from both parties, would prohibit states from collecting income taxes from individuals who worked in the state for less than 30 days.
Thune repeated arguments he made for the bill at the end of May, saying it is especially relevant as the United States battles the pandemic. “We need to make sure that medical professionals who traveled to other states to help fight the coronavirus aren’t rewarded with big tax bills,” he argued.
Supporters have been trying to enact mobile workforce legislation for years with no luck. The House has passed the bill multiple times in previous Congresses, only for it to stall in the Senate. That’s partly because Senate Minority Leader Charles E. Schumer, D-N.Y., opposes it.
Digital Goods Differences
Thune’s second bill, the Digital Goods and Services Tax Fairness Act of 2019 (S. 765), was introduced with Senate Finance Committee ranking member Ron Wyden, D-Ore., and would ensure that digital purchases are taxed only in the state where the purchaser lives.
The senator expressed concern that states looking to recover lost revenue from the pandemic would use digital purchases as a means, potentially opening the door for a digital product to be taxed in multiple jurisdictions.
The bill would also prohibit states and localities from taxing digital goods and services at a higher rate than tangible goods. “In other words, under our bill, that season of The Office you want to buy digitally couldn’t be taxed at a higher rate than if you were purchasing the season on DVD,” Thune said.
Thune and Wyden have repeatedly introduced the measure since 2011. Despite having bipartisan support in both chambers, the bill has failed to pass in either one.
New Test for Independent Contractors
Thune’s third bill, the New Economy Works to Guarantee Independence and Growth (NEW GIG) Act of 2019 (S. 700), would establish a test to determine whether a worker should be classified as an independent contractor rather than an employee for tax purposes.
The legislation targets both traditional independent contractor arrangements, such as freelance writers, as well as workers in the growing gig economy who offer services through apps like Uber, Postmates, and Instacart but “stretch the boundaries of current tax law,” according to Thune.
“During the pandemic, companies who have wanted to provide additional benefits to workers — from personal protective equipment to financial assistance — have hesitated to do so for fear that their actions would accidentally reclassify their workers from independent contractors to employees,” Thune said.
The NEW GIG Act “will ensure that the valuable services these individuals provide will remain available to the Americans who are increasingly reliant on them,” Thune added.
The NEW GIG Act has had a shorter life span than the other two bills, with Thune first introducing it in 2017. A version of the bill was included in a draft of the Tax Cuts and Jobs Act, but its provisions were removed before enactment of that law.