Obama and strip-club employees

Strip-club dancers are typically considered "independent contractors". But would that classification hold up under a new bill proposed by Obama and Durbin?

Last September, Senators Obama and Durbin introduced legislation that would close the "Section 530 safe harbor" loophole in the tax law. The way that loophole works is this:

"An employer can cut its payroll costs by up to 30% if it calls a worker an “independent contractor” instead of an “employee” and issues a Form 1099 instead of Form W-2 to the Internal Revenue Service (IRS). As long as it treats like workers the same, the employer does not have to withhold taxes from the worker's pay, forcing workers to pay all their own payroll taxes as if he or she were self-employed. And, at the same time, the employers fail to pay their fair share of federal and state payroll taxes. Section 530 bars the IRS from penalizing the employer if he falls under the safe harbor, requiring a change in the treatment of workers even if the IRS concludes that those workers should be treated as employees, and it bars the IRS from writing rules, regulations and guidance on the matter."

"Genuine independent contractors make up a small part of the American workforce because, by definition, an independent contractor operates his or her own business. They have specialized skills, they invest capital in the business, and they perform a new service, not just routine services already that other workers already provide. Most workers, especially in labor intensive jobs like construction are not operating a business of their own. [Zerzan's note: This sounds like it could target a stripper's line of work - for they don't have specialized skills, and they perform a routine service at the club.]

"This legislation will close the Section 530 loophole. It will allow the government to collect the taxes employers owe and level the playing field for all workers and employers. The legislation will also address the serious need for more enforcement of federal tax and employment laws to identify those employers in major industries that wrongly classify their workers as independent contactors and require greater cooperation between the IRS and the Department of Labor in enforcing the law."

QUESTION:

What would be the impact on strip-clubs in the US, if the "section 530" loophole were to be closed, as it would under Obama's bill? I've heard that dancers are considered "independent contractors" by the clubs who hire them. So, the club is exempted from paying Social Security contributions and all sorts of taxes and overhead. But are dancers really "contracting out" to clubs, or aren't they rather a 1st tier customer themselves? They pay a stage fee to the club (and in the club's defense, doesn't that mean the dancers invest capital in their own business??). In addition, all of the dancer's earnings come through customers' tips; they even stand to lose money on a bad night. I'm not sure how this business model can be accurately classified in terms of IRS code.

If Obama's bill passes, I wonder if the government will try to impose a straight "restaurant" model onto strip-clubs, and make the clubs pay their dancers minimum wage and benefits like Workers Comp, Social Security contributions, etc... while dancers continue to work for their tips, like a waitress?

If this legislation were to pass, and dancers have to be reclassified as employees, would this destroy the industry as we know it? I imagine clubs would only be able to retain a small number of dancers due to the massive new expense of maintaining a large stable. So, instead of walking into your favorte club and seeing 20-25 dancers, you would only see maybe 3 or 4 on a given night. And that's if the place hadn't gone out of business entirely. I guess I paint a pretty bleak picture. I just hope none of this comes to pass.

Here is a link to the article on the proposed legislation:

http://my.barackobama.com/page/community…