Opinion

NY FREELANCERS’ TAXING PROBLEM

The city should lift a levy to help middle-class workers.

NEW York City’s tax policies are damaging what is now the primary job-growth area — independent workers and freelancers.

That’s why Mayor Bloomberg has joined forces with Freelancers Union to push the state Legislature to reduce or eliminate the Unincorporated Business Tax for city freelancers. If we’re successful, some 17,000 individuals and small businesses will no longer have to pay the UBT. Today, the City Council is holding a public hearing to explore the idea.

The UBT is a well-meaning product of the 1960s. Designed to capture revenue from businesses that were not subject to the General Corporate Tax, it’s had an unintended consequence: It has caught in its net thousands of freelance and independent workers. These people make up 30 percent of the nation’s workforce, a number sure to grow as the economy struggles.

So, what’s an “unincorporated business”? Well, if you recently lost your IT job at a big company and started making a living offering freelance IT services — you are. Not only have you just become responsible for the “employer” share of your Social Security taxes and for arranging your own health insurance and retirement plan, you also have to pay a 4 percent add-on for the UBT if you work in the city. New York is one of the only cities with such a tax.

Better support for freelancers is crucial as more people turn to freelancing and self-employment. It’s self-defeating to leave independent workers out of the social-safety net and ask them to shoulder more tax responsibilities. In addition to unemployment support and other benefits, city freelancers need tax justice; a painless place to begin is by changing the UBT.

The UBT is double taxation on New York’s prime economic engine, allowing the city to tax income both on a personal and a business basis. Middle-class people and families are paying thousands of dollars in taxes because they don’t work for a company, even though they perform the jobs that keep those companies running and keep this dynamic, prosperous city afloat. For more than 40 years, freelancers have been paying the price for this sloppily designed tax. It’s time for that to change.

Independent workers account for two-thirds of the city’s job growth since 1975, according to a 2007 study by the city comptroller’s office. They drive industries ranging from technology to health care, and self-employed creative professionals have made New York an international cultural capital. Many of these individuals are subject to the 4 percent UBT simply because of the way they work.

We are heading into a renewed phase of entrepreneurialism in this country, but most freelancers can’t afford or get access to basic protections like health care, unemployment insurance, retirement plans and unpaid-wage claims. So it’s all the more unacceptable to subject them to the UBT.

Exempting freelancers from paying the UBT will help thousands of middle-class workers. When tax policies are just, they help taxes do what they are supposed to: bolster our economy and society and create an environment of opportunity for hardworking individuals.

Sara Horowitz is executive director of the Freelancers Union, a national nonprofit organization.