For his paid campaign aides, who all earn between $2,500 and $10,000 a month, Sen. Orrin Hatch has never withheld any income tax, nor withheld and paid Social Security and Medicare taxes, nor paid unemployment taxes.
Why? His campaign contends they are not really employees. It says they are consultants, or essentially independent contractors who must handle their own taxes. Of course, that saves the campaign money, potentially at the cost of other taxpayers.
Laws about when workers are employees or can be considered contractors are rather murky, but Rep. Jim Matheson, D-Utah, for example, deems his aides who do similar paid campaign work as true employees, and he withholds and pays taxes for them.
Rep. Chris Cannon, R-Utah, Democratic Senate candidate Pete Ashdown and GOP 2nd District House candidate LaVar Christensen consider some workers to be employees and some as contractors. Meanwhile, Rep. Rob Bishop, R-Utah, and Democratic 3rd District House candidate Chris Burridge list no paid workers on disclosure forms.
Only Democratic 1st District House candidate Steve Olsen, like Hatch, also considers all paid workers as consultants but he has just one such worker.
Paying or avoiding payroll taxes can make a big financial difference in campaigns. For example, Jon Canchola, the campaign manager and only paid employee for Olsen, acknowledges, "If we paid payroll taxes, it would kill the campaign. We have a small budget."
Matheson paid $14,390 in payroll taxes from January 2005 through June 2006, about 5 percent of his overall spending then. Cannon spent $8,499 on such taxes in the period, about 1 percent of his spending.
Hatch, who has a well-funded war chest, doesn't face the problem of tight finances, and paying payroll taxes likely would not dent his campaign. He has raised $4.5 million for this election and had $2.5 million in the bank at the end of the last reporting period in June and that did not count the $350,000 or more he is estimated to have netted from a fund-raiser last month with President Bush.
Dave Hansen, Hatch's campaign manager (who is paid $10,000 a month and is considered a contractor), said the decision to deem all employees as contractors was made "because our accountant told us that we could. He's the expert, not us."
In contrast, Matheson said his campaign accountant, who is also a tax attorney, advised him to deem similar workers as employees. "I also believed it was the right thing to do," he said. "I've always thought of them as employees, and that's how you handle it."
Cannon's campaign manager, Nathan Rathbun, said that while many of the campaign's part-time or occasional helpers are deemed consultants, full-time staff members are considered employees for whom payroll taxes are paid. "We're trying to move all of our employees over to full time," he said. "Our attorneys just tell us that is the way to go."
Rules and guidelines
The Internal Revenue Service and Utah State Tax Commission have many rules about when workers can be considered contractors. But IRS instructions say the basic rule is, "Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done."
Hansen said that Hatch's campaign tells paid workers what it wants accomplished, "but generally we leave the details of how to do that up to them." He described most such workers as field directors, who oversee the campaign in different areas of the state. One paid worker handles computers and other technology for the campaign.
Other tests that the IRS and Tax Commission list to help determine if a worker is a contractor include:
Whether they are reimbursed for expenses;
Whether they have significant investment in equipment of their own;
Whether they could make a profit or loss;
Who has financial control of their work;
Whether benefits are provided;
How permanent the employment is.
Financial disclosure forms show that Hatch's aides often are reimbursed for such things as mileage, supplies and cell phones something that would usually indicate they are employees instead of contractors.
Hatch's aides are paid set amounts for certain time periods, such as $2,500 a month for most of his regional directors no matter how much time they put in. That is a sign of a contractor, while anyone paid per hour is usually clearly an employee.
Hatch's aides are provided no benefits such as health care. Doing so would clearly make them employees.
However, Matheson says his campaign also does not provide benefits for employees. "Most of them are still young. While I don't know this, I imagine that a number of them are still on their parents' health-care plans. Campaigns are often stretched for money. You save where you can," he said.
Hansen said Hatch's employees have contracts and also are considered temporary signs of being a contractor. "The day the election is over, they are gone," he said though many will have been employed for more than a year by that time. The same is also true of people that Matheson and Cannon consider employees.
One test the IRS uses to determine whether a worker is an employee is whether work is done for only one entity or for many clients. Hansen said most of Hatch's paid campaign aides work full time for him but may do some work on the side for others.
Ashdown and a spokesman for Christensen said they considered campaign aides to be contractors in early campaign stages when their paid work was sporadic and part time.
But they said as their campaigns hit a higher gear and people came on board full time within the past quarter (for which disclosure forms have not yet been filed), they considered most as employees and began to pay payroll taxes.
"Having run my own business for years, I am very familiar with the rules," Ashdown said. "There was not much of a question (about deeming them as employees) when we put them on salary."
Hayden Hill, campaign manager for Christensen, says the candidate has at least five workers considered employees, and two current personnel are still considered contractors for sporadic work.
The well-funded Hatch has been able to afford more paid help than others. He spent nearly $300,000 on 15 individuals working for his campaign from January 2005 through June 2006.
Cannon spent the next most: about $143,000 in the same period. Matheson spent about $67,000; LaVar Christensen, $18,000; Olsen, $6,000; Ashdown, $4,000; Bishop and Burridge, nothing.
The amounts raised by other candidates for this year's campaigns (as of the last reporting period in June) are: Matheson, $1.2 million; Cannon, $953,193; Christensen, $264,986; Bishop, $195,171; Ashdown, $92,203; Olsen, $25,359; Burridge, $17,682.
Hatch has another interesting agreement with Mac Christensen, best known as founder of the Mr. Mac clothing stores and as president of the Mormon Tabernacle Choir, and Stan Parrish, a former top aide to Hatch and a one-time congressional candidate.
Hansen said they essentially act as co-chairmen of Hatch's campaign. But they formed a company called C&C Consulting, originally founded by Mac Christensen and the late Chuck Canfield to help in the 2000 campaign. Hatch's campaign paid C&C $101,000 between January 2005 and June 2006.
"They provide advice and assistance on political matters," Hansen said. He adds that Mac Christensen has been "very involved in fund-raising."
Hansen adds that Christensen and Parrish "have been close to Sen. Hatch for many, many years," and they jointly plan political strategy together.