On March 12, the Sacramento Bee published an interesting if incomplete story about California’s underground economy. According to the Bee, California is reeling from the loss of $10 billion in underpaid taxes. [California Losing $10 Billion a Year in Tax Underpayment, by Dan Walters, Sacramento Bee, March 12, 2012]
Walters’ story, based on a study conducted by the Franchise Tax Board staff, emphasizes the lost revenue from tax cheats and notes that underpayment has increased from $6.7 billion just seven years ago.
But Walters’ completely ignores illegal immigration’s prominent role in the state’s tax shortfall. I’m certain that Walters understands it; he’s been writing about California’s social issues including immigration and overpopulation for decades. The Bee may consider underground working aliens and their link to tax shortfall a politically incorrect subject.
Having lived in the San Joaquin Valley for nearly 25 years, I’ve seen firsthand the consequences when aliens work off the books. And I didn’t have to look very hard to find it. In my neighborhood—and I suspect in many California neighborhoods—house cleaners, day care providers, gardeners, roofers, pool men worked off the books for cash payments. (Personal note: I didn’t have a pool but because prefer to spend my leisure time in activities other than home upkeep, I did have a lawn guy and a twice a month housekeeper, both American citizens. And when I had a new roof installed, I had an all American crew.)
California’s hard pressed taxpayers who may have deductions as high as 30 percent taken from their monthly checks for federal, state, local, payroll and health care, subsidize off the books workers. The day care provider who may earn $10 an hour in reality takes home the equivalent of a taxable $13-$15 hourly. But she likely qualifies for food stamps, Medi-Cal and rent subsidies, few of which taxpayers receive.
The solutions are obvious; CAPS has advocated for them since its founding in 1986: secure the borders and dramatically reduce government programs that aliens can access including public education which alone costs taxpayers billions. Fewer available entitlements translates to much less illegal immigration.
Of course, employers are also complicit in the underground economy scandal. Until mandatory E-Verify becomes law, employers can nevertheless use the program’s self check feature to confirm that his new hires are legally authorized to work. He must also pay all the appropriate taxes.