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From Burden to Benefit: Policy for the “Etsy Earner”

A few days ago at Real Clear Politics, Ben Domenech proposed what he called an “Etsy Earner” agenda for the GOP, targeting part-time self-employed “1099 Moms.” His policy prescriptions include relief in the areas of taxes, education, childcare and daily expenses of keeping gas in the car and food on the table. The concept is strong, and his effort to offer a starting point is commendable. As more and more people find ways to establish an income beyond the traditional work environment, they are also discovering a host of disincentives. Since the 1930s, Washington has constructed a complex employer-based system of benefits. As middlemen, employers provide a buffer against taxes (more on that here) and a convenient vehicle for health and retirement benefits. Our tax and benefits systems have failed to evolve with the economy, leaving many independent earners at a severe disadvantage. Americans celebrate the idea of people leaving the corporate world to start their own venture, become their own boss and see their dreams realized. But those who do will pay tax penalties, spend countless hours navigating legal paperwork, pay significantly more for health insurance and so on. Add to this the fact that starting a business is rarely easy or profitable at first, and suddenly, the ease and assurance of a traditional job looks much more appealing. This web of discouragement stifles the kind of creativity that has helped America to lead the world in innovation and wealth creation. While Domenech emphasizes the effect on women, his “Etsy Earner” agenda could equally be described as a package for the middle class in general. Many middle class Americans feel a disconnect with the Republican party, because it does not represent their interests, even though the party may support their values. One strategy for amending this is to capitalize on growing opportunities for self-employment by eliminating barriers and encouraging the kind of independence, responsibility and accountability that accompanies the transition from employee to entrepreneur. Domenech suggests the recent phenomenon is a consequence of the economic downturn. This is certainly true, in part; many are supplementing lost income by finding ways to make a few bucks here and there. But there may be more to the story. He notes that Houston has experienced a 12 percent increase in 1099 filing since 2009, but as Forbes wrote last year, Houston has been nearly insulated from the recession experienced by the rest of the nation. The upward swing in self-employment may actually signal new economic opportunity and potential for growth. It is a product of the intersection of three trends: the DIY movement, the increasing ease of e-commerce and the desire of many young mothers to restore the art of home and family. Those who used to make and sell goods for their schools, fundraisers and craft fairs are turning their talent into a part-time business with the capacity to reach a global audience. These entrepreneurs can make, market and expand while keeping up an organic garden and greeting the kids at the bus stop after school. The loss in pay compared to full-time corporate work is offset by the elimination of day care expenses. Furthermore, many parents are willing to take a cut if it means spending more time with their children. If nurtured via policy adjustments, this shift could be pivotal in strengthening the family unit in a way not seen in generations. As I pointed out in my last post, 3D printing technology is likely to take Etsy Earner opportunities to a whole new level. People will be able to manufacture productsthat would have required a small-scale factory just a decade before; items that once demanded hours of the craftsman’s day will be ready for shipment in minutes. Sadly, internet tax and regulation proposals threaten the growing opportunities for home-based producers and sellers. As Erick Erickson at RedState has noted, the Marketplace Fairness Act—supported by many Republicans—will apply sales taxes to e-commerce. If it passes, small shops and one-person operations will no longer have this advantage, and business expenses will necessarily increase. All this aside from what it will mean for every American who enjoys downloading music or shopping tax-free online. Technology continues to provide lower costs and flexibility that enables more peopleto become independent entrepreneurs. Rather than imposing new limits on them in the name of “fairness,” we must offer practical solutions that fit the new lifestyle of these “Etsy Earners.” Doing so can support a movement back to strong families and a strong economy. From retirement and health savings accounts to taxes and regulation, independence should be a benefit, not a burden.