The Tax Reform Act Of 1986 Returns To Bite Austin, TX, On The Ass

I wonder how many other arcane grievances there are in the Big World out there?:

The litany of grievances recorded in Joseph Stack's suicide manifesto is so vast and all-encompassing that it puts your average paranoid conspiracy theorist to shame. Few targets escape his disgust and hatred: The government, the drug and insurance companies, "the joke we call the American medical system," the "vulgar, corrupt Catholic church" and equally "corrupt unions," the "sleazy executives" of accounting firm Arthur Andersen and Detroit's auto companies, savings and loans firms, the city of Austin, wealthy bankers, "pompous political thugs and their mindless minions" and of course, the ultimate target of his wrath, "Mr Big Brother IRS man."

...In the early 1980s, writes Stack, he was a "wet-behind-the-ears " contract software engineer in southern Calfornia. As such, he fell into a class of worker that has always enjoyed (or suffered) from ambiguous tax status. A truly independent contractor is responsible for his or her own taxes and other expenses -- such as health care -- and many libertarian-minded software geeks have always liked it that way.

But just as many corporations in the high tech world have consistently sought their own advantage in pretending that full-time employees were actually independent, and thus could be denied worker benefits.

Somewhere in between were true independent contractors who had long-standing relationships with single companies, and for a while, the tax code recognized this explicitly. There's a nice (and speedily assembled) treatment of this point in the Tax Foundation's Tax Policy blog written by Joseph Henchman.

In 1978, Congress passed a moratorium that allowed high tech workers who had previously considered themselves independent contractors to continue doing so. But then came Stack's nemesis, Section 1706 of the Tax Reform Act of 1986, which removed that protection from certain "technical personnel" -- specifically singling out those who provided services as a "engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker."

Henchman:

As part of the 1986 Tax Reform Act, that moratorium was abandoned for high-tech consultants, who then faced the same employee/independent contractor test as everyone else. High-tech consultants were targeted because there was strong evidence that they were abusing the moratorium as a tax shelter and because it fit a need to offset a separate unrelated tax change in the Act that would result in a revenue reduction.

Was Joe Stack abusing the moratorium as a tax shelter? Or was the amendment to the tax code just a naked government grab for cash from the hard-working pillars of the high tech economy? Perhaps the avalanche of reporting to come in the days ahead will enlighten us.