There is no state payroll tax, so California has literally nothing to gain in terms of taxation whether drivers are employees or contractors.
Even at the Federal level, the taxes net out the same. For employees, your employer pays half of your social security contribution, but as a contractor, you have to pay the employers half on your taxes.
The only thing I can come up with is unemployment insurance, which contractors don’t pay, but they also can’t collect unemployment.
Minimum wage requirements alone will raise incomes and thus taxes. Add in bigger salaries, benefits, vehicles, equipment, etc that the company will now have to pay for.
Like other states with income taxes, California deducts state income taxes from employee wages just as the Federal government does. Yes, as a contractor, you are supposed to do that yourself, but enforcement is an issue and I assume at least some Uber drivers (like some taxi drivers, bartenders, and others) have been underreporting, so this should bring in more tax revenue to both the state and federal governments. Not sure the drivers are going to benefit from that, but it's a real thing.
There are also immigration issues -- Uber will need to collect documentation so that workers can set their W2, and even though CA bans requiring businesses to use e-verify, Uber does business in many states and this would fall under interstate commerce concerns, and the federal government requires it for some border states and also for any business that sells to the federal government, so there is gonna be a whole host of immigration issues around e-verify, right in time for the election season. (E-verify is one of those things that is wildly popular, supported by both a majority of Democrats and Independents as well as the GOP, but hated by CA legislators and some in the business community, so expect this to set the stage for an e-verify showdown and battles over executive orders in 2020).
Then there are all the issues about whether Uber is going to limit hours, require working hours, or otherwise regulate their workforce a lot more than they currently are. Here by Uber, I mean all the taxi driving apps/companies, of course. Will Uber just "fire" drivers that don't generate enough fares to justify a set minimum wage? Will it no longer be allowed for drivers to come down from Sacramento and work in SF? Will Uber limit lunch breaks to a certain length, and force the app to be turned on during pre-arranged hours? A lot depends on how Uber responds.
Even at the Federal level, the taxes net out the same. For employees, your employer pays half of your social security contribution, but as a contractor, you have to pay the employers half on your taxes.
The only thing I can come up with is unemployment insurance, which contractors don’t pay, but they also can’t collect unemployment.
If I’m missing something, please clarify.