First Page
915
Last Page
948
Document Type
Article
Abstract
Self-employed individuals who operate through a business entity can often dictate how much employment tax they pay, if any. That’s because the rules permit them to control whether their earnings count as labor income – which is subject to employment tax – or the returns on any capital invested in their business – which is not subject to the tax. The GILTI rules enacted as part of the 2017 Tax Act assume that capital investments generally earn a 10 percent annual rate of return. That same assumption can be used to allocate the earnings of a self-employed individual between the income from their labor and the return on any capital invested in the business. Such a mandatory rule would eliminate the abusive practices that self-employed individuals currently utilize. It would also raise considerable revenue while permitting the entire tax system to operate in a more consistent and equitable way.
Recommended Citation
Richard Winchester
A GILTI Fix for an Employment Tax Glitch,
48 Pepp. L. Rev.
915
(2021)
Available at:
https://digitalcommons.pepperdine.edu/plr/vol48/iss4/2
Included in
Business Organizations Law Commons, Legislation Commons, Taxation-Federal Commons, Tax Law Commons
