The Underground Economy

Barron's (cover story -The Wall Street Journal Classr0oom Edition) ^ | April 2005 | Jim McTague

[pigdog]

Illegal Immigrants and Others Working Off the Books Cost the U.S. Hundreds of Billions of Dollars in Unpaid Taxes

America has two economies: First, there's the legitimate economy, in which craftsmen are licensed and employers and employees pay taxes. Then there's the fast-growing underground economy, where millions of nannies, construction workers, landscapers and others are paid off the books, their incomes largely untaxed. The best guess as to the size of the output of this shadow economy is about $970 billion, or nearly 9% that of the real economy. It could soon pass $1 trillion.

What is largely fueling the underground economy, experts say, is the nation's growing ranks of low-wage, illegal immigrants. The government puts this population at 8.5 million, but that may represent a serious undercount. Robert Justich, a senior managing director at Bear Stearns Asset Management, makes a persuasive case in a recent research report that illegal immigrants actually number 18 million to 20 million. If that's true, the economic implications are profound and could help shape this year's debates over both immigration policies and tax reform.

[lewislynn]

there are two primary items internal to the US; taxes and illegal aliens in that order

In that order only in your mind or there at AFT central...

Meanwhile, Honda isn't listening to Fairtax naysayers (as if they even know you exist) and is going to build a new plant in Indiana anyway.

[OkieDoke]

And the recent Senate bill contained a provision giving illegals a 40% tax exemption . . .
How many US citizens failing to report income do you think would get a break like that from the IRS? More like interest, penalties, a tax court date then garnishments.
Hey, they want us to report 'imputed income', `unpaid sales
taxes' from internet purchases and `income' from bartering!

It's way past time to start deporting scoff-law illegal aliens. (That would be *all* of them.)

[lewislynn]

With the FairTax, illegals will pay taxes at the same rate as you and I but will not be eligible for the prebate making their effecive rate right up there.

WOO! WOW! That is special!

But they do pay all those embedded taxes you guys claim exists now too don't they.

[Principled]

Do you really think these same people are going to relinquish their power by passing a sales tax?

Yes, the nrst does take away a major tool of the pols controlling us.

Put it this way...

Do you really think these politicians are going to relinquish ALL of their power by choosing not to support the nrst - and subsequently being voted out of office in favor of an nrst supporter?

Your analysis fails to recognize the numbers of people and the rate of growth of the nrst.

[lewislynn]

but will not be eligible for the prebate making their effecive rate right up there.

Would you stake your life on that promise?....I didn't think so.

[Principled]

Isn't it obvious to you yet that the people who love taxes and spending most, including the Prsident, couldn't care less that illegals don't pay taxes.../convoluted

But lewis, the people who love taxes and spending most are the ones who care the most about wanting to legalize them.

[StJacques]

". . . neither motive has anything to do with paying taxes."

This is from the President's speech to the Chamber of Commerce, June 1 of this year:

". . . My position is clear: I believe that illegal immigrants who have roots in our country and who want to stay should have to pay a meaningful penalty for breaking the law, to pay their taxes, . . ."

And you will also find it, in almost the same language, in paragraph 22 of President's address to the nation of May 15

No, obviously getting illegal immigrants to pay their taxes never entered into the picture, even though he always says that is an important reason to deal with their status.

[StJacques]

"But they do pay all those embedded taxes you guys claim exists now too don't they"

Problem in your phraseology there. It could better be stated that "they do pay all those embedded costs of the income tax." And yes they do. But that in no way brings them into compliance with the rest of the country, since everyone else pays the income tax too.

[Principled]

It could better be stated that "they do pay all those embedded costs of the income tax." And yes they do. But that in no way brings them into compliance with the rest of the country, since everyone else pays the income tax too.

Well stated StJacques.

You will find this poster to be one of a handful who fail to recognize that the income tax has costs to our economy other than taxes per se.

[Dosa26]

Your analysis fails to recognize the numbers of people and the rate of growth of the nrst.

Just an observation...2 groups who will NEVER support a nrst are the working-poor and those on a fixed income (Welfare, SS, retired). That probably sinks you right there, not to mention a host of other problems.

[lewislynn]

No, obviously getting illegal immigrants to pay their taxes never entered into the picture,

I said taxes aren't the motive for legalization or amnesty and they aren't.

"Getting illegal immigrants to pay their taxes never entered into the picture" are your words not mine.

[Principled]

2 groups who will NEVER support a nrst are the working-poor and those on a fixed incomes...

Why not? I think they would.

That probably sinks you right there, not to mention a host of other problems.

Well, I'm not going to sink. I didn't write this bill. But beyond that, what "host of other problems". I've been looking at tax reform a looooong time and this one is the best alternative IMO.

I'd be happy if you would share your information with the forum. Are you willing to explain why you think working poor and those on fixed incomes will oppose this bill? And are you willing to be specific with the "host of other problems". I know I would appreciate the information - and i'd bet the forum would too.

[MarkL]

I seem to recall reading that the #3 source of income for Mexico is money sent from the US to families back there.

Just how much of that money is earned illegally?

Since there are state and federal laws that require the government to confiscate any illegally earned money, and since the SCOTUS deemed that property siezed in this way doesn't have to be returned until the person it was seized from can prove it was earned legitimately, it seems to me that any money sent via wire services from the US to Mexico be intercepted and held by the government, until the person sending it can prove it was earned legally.

And if it wasn't earned legally, then sanctions on the employer must be extremely painful.

Mark

[StJacques]

""Getting illegal immigrants to pay their taxes never entered into the picture" are your words not mine."

Your words, from post #15 were (underline emphasis mine):

"You call it "legalize" I call it amnesty and neither motive has anything to do with paying taxes."

I somehow find it legitimate to conclude that if the motive of getting illegal immigrants on the books doesn't have "anything to do with paying taxes" (your words) that an equivalent statement would be that you are saying it "doesn't enter into the picture at all" (my words).

And I had pretty good English grades.

[Dosa26]

Why not? I think they wouldBecause they don't pay hardly any income taxes now. Why should they want to start?

[ExtremeUnction]

Those employers should be arrested for not reporting taxes to the government.

Before we blame the "Underground Economy" on illegals and their employers, let's look at the big picture. I know of many people who exchange services for services. I have neighbor who has a very successful tattoo business. He routinely compensates individuals who provide services at his house with free tattoos at his shop. And I can give many more examples of barter that goes on everyday. This person is not doing this to avoid taxes, it's just a logical and easy way to trade services. I think that this has been going on since our country was founded.

[Clintonfatigued]

Border security and economic sovereignty ping

[Principled]

What indicates to you that someone who pays little or no income tax now would pay otherwise under the nrst? Seems to me that this person would pay little or no net nrst too.

[StJacques]

You are correct that a lot of people exchange services. I do it myself on occasion. I've developed several small web sites for friends in exchange for everything from getting a chance to use hidden files on their servers for demos for potential clients to getting help on cutting down a tree Hurricane Rita knocked down in my backyard, instead of paying a service $2,000 to do it. I take my labor and turn into capital.

No one can claim that the underground economy will ever be eliminated under any tax system. Nor is it desirable that it should be. But 300+ billion in uncollected taxes (according to CBO) is a situation that must change. And that figure goes way beyond the impact of illegal immigrants.