California’s underground economy is booming. This hidden, untaxed economy generates an estimated $60 billion to $140 billion per year. That translates into a loss to the state in tax revenues of between $3 billion and $6 billion annually.
Constructing an Underground Economy
One of the places the underground economy flourishes is in the construction industry. Many construction industry employers pay workers in cash, avoiding income and Social Security taxes, as well as deductions for workers’ compensation and health insurance.
In an underground economy, employers can pay below-market wages, avoid paying overtime, and skirt safety regulations, among other things. Subtract those costs from the normal price of doing business, and the black market employer gains a significant advantage over competitors.
Underground economy employees benefit as well. They escape paying taxes – and for some ex-spouses, avoid paying child support. If an employee’s income is not being reported or deposited in a bank, it cannot be garnished or tracked.
Four-pronged Attack on the Underground Economy
California state legislators Bill Berryhill of Modesto (26th Assembly District) and Bill Monning of Santa Cruz (27th Assembly District) shared their four-part plan to combat California’s underground economy with the San Jose Mercury News.
Berryhill and Monning have introduced AB 2770, a piece of legislation to establish a triggering mechanism for possible investigation by the Department of Labor Standards Enforcement, the Employment Development Department and the Franchise Tax Board.
A request to the Economic & Employment Enforcement Coalition to have members available in each legislative district to talk to employers and employees about their rights and responsibilities under state law.
Creation of a bipartisan Working Group on the Underground Economy. The group will develop with law enforcement and other interested parties legislative proposals for 2011.
The enforcement of current labor laws. This will force underground employers above-ground or out of business, making them pay legal wages with legally required benefits. It will force underground dads (and moms) into the light of day as well: they won’t have a place to hide from their legal responsibilities to their children and ex-spouses under family court orders.
Divorce and Family Law
If you face a conflict over child support enforcement or a dispute over child custody, contact a California family law attorney who can evaluate the facts of your situation and help you understand your options. A family law and child custody lawyer helps you make use of the law to protect yourself and your family.