78-02-A6
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Independents vs IRS[edit]
Transcript[edit]Reginald Dwyer is one of a rare breed, an independent Vermont logger. Even in subzero weather you can find Reg Dwyer out in the woods, bringing out pulpwood to feed the nation's huge appetite for paper products. And, after a hard day in the woods, you may find him at the school board meeting in his little town of Sheffield. Reg is one of those dependable, community-minded small businessmen who have done so much, over two centuries, to create the image of Vermont in the national mind. But Reg Dwyer is in trouble - $18,500 worth of trouble - with the Internal Revenue Service. It's not about paying his taxes - he's always done that. It's about paying other people's taxes. To understand why the IRS is hounding him and dozens of other small logging contractors in New England and the deep South, it's necessary to know how an independent logging operation works. Most of the pulpwood produced by independent loggers in the northeast is produced on what is called the contract system. The prime contractor - a man like Reg Dwyer - secures stumpage or cutting rights. Then four operations follow in sequence: felling and limbing the trees, skidding the logs to a collection yard, cutting the logs to pulpwood size, and loading and trucking the wood to the paper mill. Sometimes, in large operations, one company will hire employees to perform these various operations. But, in independent logging, each operation may be performed by a specialist who works on contract with the prime contractor. Fellers and cutters provide their own chain saws, fuel, safety equipment, and transportation to the job. The skidder may own his own bulldozer or skidder to haul the logs out of the woods. The trucker will own his own truck with an expensive clamshell loader. Now, all these subcontractors are in business for themselves. They may work for many different logging contractors over the year. But the IRS has traditionally been hostile to this independent business system because it makes it more difficult for it to track down and tax every dollar of income. Self-employed persons pay less than employees to social security. And they may deduct up to five times as much in self-employed retirement plans as employees. So the IRS informed the Dwyers - by announcing it to them before their neighbors in the lobby of the Sheffield post office - that they owe Uncle Sam $18,500 in social security, withholding, unemployment insurance taxes, penalties and interest for all the independent subcontractors they have contracted with over the past five years--whether or not those subcontractors have already paid the required taxes! And if the Dwyers have to pay, it will darn near put them out of business. New England's independent loggers are not the only victims of this IRS attack. Independent contractors of all kinds -- artisans, truckers, taxicab operators, repairmen, and fishermen are under the same gun (although Congress exempted certain lobstermen by statute in 1976). It's time that Congress told the IRS, loud and clear, that the independent small contractor is a vital part of America . They cannot survive if, in addition to the risks of the economy, they are harassed into insolvency by an IRS determined to make them pay the taxes of others with whom they contract, as well as their own. This is Ronald Reagan. Thanks for listening. |
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