[Congressional Record Volume 152, Number 77 (Thursday, June 15, 2006)]
[Extensions of Remarks]
[Page E1160]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




TRANSPORTATION, TREASURY, HOUSING AND URBAN DEVELOPMENT, THE JUDICIARY, 
 THE DISTRICT OF COLUMBIA AND INDEPENDENT AGENCIES APPROPRIATIONS ACT, 
                                  2007

                                 ______
                                 

                               speech of

                        HON. DENNIS J. KUCINICH

                                of ohio

                    in the house of representatives

                        Wednesday, June 14, 2006

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill. (H.R. 5576) 
     making appropriations for the Departments of Transportation, 
     Treasury, and Housing and Urban Development, the Judiciary, 
     District of Columbia, and independent agencies for the fiscal 
     year ending September 30, 2007 and for other purposes:

  Mr. KUCINICH. Mr. Chairman, the misclassification of employees as 
independent contractors is a significant problem that annually leads to 
billions of dollars in lost Federal tax revenue. Employers who 
misclassify workers as independent contractors do not pay payroll and 
other taxes on those workers. The employers also gain an unfair 
advantage over their competitors by eliminating a piece of their labor 
costs. In the construction industry, for example, a contractor who 
chose to misclassify his workers as independent contractors would be 
able to easily underbid other construction companies who followed the 
law. Misclassification hurts workers and fair employers and has a 
significant monetary impact on government revenues.
  The misclassification of employees as independent contractors is not 
a new problem. Over the past several decades, the IRS and Congress have 
periodically investigated the issue of misclassification. In 1984, in 
an estimate of the extent of misclassification for 5.2 million 
businesses, the IRS found employers had misclassified 3.4 million 
employees. Approximately 750,000 employers had misclassified employees 
as independent contractors. More recent estimates in the 1990s have 
estimated that the percentage of employer misclassifying employees has 
grown even beyond the 15 percent found in 1984. An independent study 
issued by Harvard Law School's Labor and Worklife Program, found abuses 
of the term ``independent contractor'' led up to 19 percent of workers 
across all industries being misclassified in the State of 
Massachusetts. Clearly, this problem is not going away on its own.
  This misclassification is not merely a problem for workers who can 
unfairly be left without workers compensation or unemployment 
insurance. It also impacts local, State and Federal government revenue 
streams. In 1984, an IRS review found at least $1.6 billion in Federal 
tax revenue was lost due to misclassification in that year alone. A 
2005 study on the issue in Maine also found a significant loss of State 
income tax revenue. While the statewide study of misclassification in 
Maine did not estimate the loss of Federal income tax revenue, it is 
evident the misclassification issue continues to negatively impact the 
revenues of the Federal Government as well.
  We cannot, in good conscience, continue to ignore the problem of 
misclassification and its impact on Federal revenues. In a budget 
climate where many good and necessary programs are shortchanged, we 
cannot afford to continue losing billions of dollars each year to a 
problem for which there is no excuse and that we all can agree needs to 
be fixed.

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