Monday, May 15, 2006

Immigration Isn't The Only Problem

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I have just returned from a family event in a Western US state. During the course of my chats with various members of my extended family, I have come to realize that the issue facing us isn't completely about immigration when it comes to the illegal issue. Fully half the problem is with us, right here in America. Allow me to elaborate on a couple of conversations I had.

Family Member A is a college student at a university in a Western US city. He works in both summer and winter to provide himself with an income. In winter he is a snowmobile guide and in summer he works construction. Both jobs are "under the table" in that he gets paid cash, has nothing withheld, and gets no W2 or 1099. As far as the IRS and his employer is concerned, his labor doesn't officially exist. He pays no taxes on his income and his employer is not burdened with unemployment insurance premiums, workers compensation premiums, 1/2 of the social security tax and other withholding trouble.

Family Member B is a drywall contractor in another major Western US city. He owns his own business and employs several people. Most of his work comes from bids to developers who are building large developments. He provides benefits and does all the proper withholding. He is finding it nearly impossible to compete with other contractors employing "under the table" labor. Sure, some of those laborers might be illegals, but many aren't. These competitors will take anyone willing to work. The only reason my relative is still in business is because of his quality of work and it's reputation coupled with the fact that there are some high-end developments under construction that are willing to pay extra for "premium" labor.

Making the illegals legal isn't going to fix the problem as long as employers are willing to hire anyone and not withhold proper taxes and file required paperwork. Family member A is white as Wonder Bread His coworkers at his construction job are about 2/3 hispanics who speak little or no english and he suspects are here illegally. The other 1/3 are young folks like himself who found a summer job working "under the table". We must smash this culture of under the table employment if we are ever going to get a grip on the illegal immigration problem.

If employers right now decided to "legal up" in their employment paperwork, the illegal worker problem would become a much smaller issue. Business employers aren't the only ones doing it either. A good many regular individuals do too. Do you have someone who does some light housekeeping for you, watches your kids or cuts your grass? Have you ever provided a form 1099 for the money you paid them over the course of the year? If you pay them by cash or personal check, chances are good they aren't reporting the income on their taxes. Filing a form 1099 would notify the government of the money you have paid them. Check with the IRS, they can usually answer your question over the telephone.

It is a myth that illegals take jobs that other Americans won't do. They pretty much take what they can get and often work side by side with other Americans. Most often, illegals take "under the table" cash employment. If we could stop that practice, we could eliminate a lot of the incentive to come here in the first place. The practice of "under the table" employment is everywhere. Several years ago I knew of a single mother on welfare who worked "under the table" doing childcare for other working mothers. She also had a live-in boyfriend who paid most of the bills. Had those other women filed 1099 forms for the money they paid her, the state and federal government would have been aware of her true income and would have given her the opportunity to pay her share of taxes and probably reduced or eliminated her welfare payments because she was actually doing quite well for an unemployed single mom. In fact, I would venture to guess that a large number of American "unemployed" are actually working "under the table".

Look in the mirror, America. There's the problem.

UPDATE:

This ties in with another thing I have considered. A national sales tax would provide a means to tax the "under the table" economy. It wouldn't matter if you are pouring cement or running a meth lab, you are going to spend the proceeds of your undocumented income at some point. A national sales tax would tap that undocumented economy. Most areas already have a mechanism for collecting sales tax so we are talking a couple of percent increase and the state sends a cut to the feds. Simple. The cost of putting it into motion is minimal and I believe the resulting revenue would be beyond anyone's expectations. It is also a "progressive" tax because poor people spend a greater portion of their money on rent, utilities, and groceries which would be exempt. You could make it even more of a "progressive" rate tax by exempting home purchases up to the amount of the state median home price from sales tax. Rich people would most likely purchase homes much above the median why the lower income would buy homes closer to or below the median paying less or no sales tax.

1 Comments:

Blogger 2164th said...

You are correct, the underground economy is the the driving force for illegal immigration. If an employer pays an illegal the same net pay as a native worker, he realizes a 30% cost advantage over a compliant competitor. Throw in workers' compensation, holiday and vacation pay and a slightly less pay and the cost advantage is greater than 50%. The average illegal worker will also work harder and longer. There is a huge economic incentive for both the employer and the illegal. As always follow the money.

9:43 PM PDT  

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