Based on what I read in the newspaper, I'll give credit to the Freelancers Union and Councilmember David Yassky for sticking up for one of New York's losers: self-employed freelancers and owners of their own small businesses. Many of the former are employees in all but name, but designated independent contractors so their employers do not have to pay social security and unemployment taxes, and can provide tax-free health insurance to the higher ups and those with seniority but not to new hires. Most of the victims of this shift in practice are the young, yet another two-tier contract with a worse-off following generation. And the City of New York adds injury to injury by taxing the income of freelancers twice, once through the local income tax and once through the unincorporated business tax.
The unincorporated business tax is intended to tax the profits of businesses that happen to be organized in proprietorship or partnership form, rather than as corporations. With more companies going private, this form of ownership is set to expand. But in addition to the equivalent of corporate profits, the UBT also captures the equivalent of wage income for those who happen to work for themselves, even if it is no greater than the wages earned by comparable wage and salary employees. That just isn't fair.
At what point can self-employment income be considered the equivalent of wages, not of additional profits earned through ownership of a firm? Certainly those who merely work for themselves with no paid employees cannot be held to be making a profit, since unlike partners at law or accounting firms they have no others workers and little invested capital whose earnings may be profited from. Another way to look at it, however, is there is a cutoff above which earnings cannot be reasonably held to the wages of individual work, and must instead be considered the profits of having the ownership of (or at least power in) an organization. The current proposal I read about in the newspaper is to exempt self-employment income below $100,000 from the unincorporated business tax, taking only those earnings above this level.
I'm not sure that is the right number. As it is, we have two measures of what is considered a maximum "wage" in this state: the pay of our highest state and local officials, the Mayor of New York City and the Governor of New York State, and what is accepted as "reasonable compensation" for executives at "non-profit" "charities." The state has allowed these organizations to continue their exemption from state and local taxes while paying their top people millions of dollars. To equalize pay among freelancers, the non-profit sector, and the government, I propose that the these three be the same — the minimum income subject to the unincorporated business tax, the maximum income accepted as "reasonable compensation" in organizations exempted from taxes as “non-profit” charities, and the pay of our highest ranking public officials.