The Importance of Qualitative Research Approaches to Gig Economy Taxation

Abstract

As the United States tax system continues grappling with how to accurately and appropriately tax workers in the gig economy, it confronts a number of questions. For example, what relationships are included in the gig economy? How many workers and firms are involved, and is the number increasing or decreasing? What particular problems do these workers encounter when engaging with the tax system, and are these meaningfully different from the problems confronted by other taxpayers? Is there a prototypical gig worker, or would gig-specific tax reform or relief have to be tailored to different types of gig workers (e.g., contributors of labor as opposed to contributors of capital)? If there is a prototypical gig worker, what is that worker’s profile, and is it shifting? Is independent contractor classification for gig workers appropriate, and is it desired by workers? Is the tax system affecting the labor supply decisions of gig workers?

Many of these questions have proven difficult to answer due a lack of adequate information. But the answers are important because they will shape how and whether the tax system responds to the gig economy, including how it approaches business deductions, tax withholding, and income definitions, how and whether it utilizes safe harbors and de minimis exceptions, how it designs taxpayer forms and instructions, and how it allocates enforcement and taxpayer education resources. In addition, as we have discussed in previous work, the tax system’s evolving responses to the gig sector will affect other legal areas such as employment law, labor law, and antitrust. Thus, the question of how to obtain the data and information necessary to formulate sound tax and related policies for gig work is vital.

This chapter discusses the limitations of quantitative empirical research on the gig economy and argues that incorporating more qualitative approaches will be essential in attaining a comprehensive understanding of the tax policy issues involved. Specifically, this chapter emphasizes that adoption of a diverse set of research approaches is crucial because the administrative tax return and labor survey data are insufficient and are shaped by prior decisions of gig economy firms and participants. Many questions remain that such quantitative data, by its very nature, cannot answer.