The implication is partially two fold:

(1) Most business owners ("millions of small business owners"), especially those that are independent LLC owners, do not fully understand the cost implications of their business's financial health. By their very nature, they do not have dedicated financial expertise, typically lack strong accounting principles, etc. My sister, a personal trainer, is a great example of this. I had to explain to her what "writing off" expenses actually meant.

more importantly:

(2) Uber knows this and exploits it.

I said absolutely nothing about government.

Millions of small business owners, me including, make these kind (and other) mistakes all the time for various reasons. We are all very much fallible and don't go out of business because most of the time our mistakes don't have huge consequences and everyone else makes their own mistakes too.

Have you ever heard of MLMs? Of which there are thousands of examples around the world? Herbalife, Forever Living Products, Amway, etc.

All based on there being a large chunk of people[1] that don't really understand how money works.

[1] I'd put that number based on anecdata, at least at around 20-30% of the population.

This may be true in some cases- lots of drivers -many of who are new immigrants-see this as the quickest way to get a job and don’t realize they have no worker protections like paid sick leave, worker’s compensation, that employees get or the tax implications of being a contractor vs employee