FLYING SOLO? McSally ONLY Major Senate Candidate With No Employees, Paying No Payroll Taxes; IRS/State Violation?

Last year, Arizona Rep. Martha McSally (R-CD2) voted against permitting Congress to review the tax returns of President Donald Trump (as part of tax reform legislation). This year – as McSally has become a frequent defender of the President – her Senatorial campaign committee has taken the unusual position that there are NO (taxable) employees working on her campaign.

By classifying 13 apparently-full-time persons as independent contractors, McSally has avoided paying the employer’s share of payroll taxes, Social Security and Medicare withholding, unemployment taxes, benefits, etc.

Arizona’s Politics reviewed the campaign filings of the Republican and Democratic candidates running in the 10 highest-spending Senate campaigns and found that McSally is the only one who decided to classify her top staff as independent contractors.  Democratic Senator Bill Nelson’s (D-FL) campaign previously was set up the same way until the Washington Free Beacon publicized the questionable workaround in July.

(Last week, Arizona’s Politics reported on the FEC’s concern about the McSally For Senate committee not disclosing necessary contributor information, despite previous assurances.)

Based on our review of the most recent, 3rd quarter filing, McSally has 13 people receiving monthly payments ranging from between $1,445 and $7,000, and at least that many receiving smaller bi-weekly payments. All of them list “field consulting” in the subject line. There are no payments made for “taxes”, “payroll”, “health insurance”, etc.

The second group may legitimately be people being paid for irregular, part time work making phone calls or knocking on doors. However, the first group includes people listed – by the campaign and/or the individuals – as the Finance Director, the Political Director, and the Communications Director. None of these individuals lists any jobs other than their title with the McSally For Senate campaign on their personal Twitter or LinkedIn pages.

It is not simply the exclusivity or number of hours worked that the IRS and Arizona agencies use to determine whether someone is a legitimate “independent contractor” rather than an “employee”. In order to prevent abuse of the distinction, the government polices possible abuses through complaints by the workers, third parties and sometimes on their own initiative.

In fact, Arizona passed a new law in 2016 which was designed to give businesses some clarity in setting up an independent contractor relationship. It lists a number of criteria to be considered in determining whether an employer/employee relationship can be avoided. Those criteria are listed below.* Similarly, the IRS test provides 20 questions to help parties determine how much control the “employer” has in the relationship.

McSally is running for the hotly-contested Senate seat opening up because of the retirement of Sen. Jeff Flake (R-AZ). Fellow Rep. Kyrsten Sinema (D-CD9) is the Democratic nominee.

Sinema’s most recent campaign report indicates a payroll of more than $90,000 per month, with withheld taxes/Social Security/Medicare/workers comp/etc totaling more than $36,000 per month. While McSally’s payments for “field consulting” is approximately half of the Sinema payroll, the taxes not paid are in the five figures each month.

Then-candidate Trump infamously said that avoiding taxes made him smart. He has declined to provide the evidence that would prove whether he was smart or had possibly crossed the line. McSally’s campaign has not yet responded to Arizona’s Politics’ requests for more information that may prove her independent contractor move to be smart.

(McSally’s campaign finance report and Arizona statute re: independent businesses can be viewed here.)





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