Buried treasure-- New report digs into 'Underground Economy'

By Tom Kirvan Legal News It's big business. A nearly trillion-dollar business that touches every corner of the country, dwarfing annual revenue figures of Fortune 500 companies. This business isn't taxed. It's labeled the Underground Economy or what officials call moneys secretly earned through unreported cash transactions. A new report released last week by the Underground Economy Task force says Michigan is losing out on taxes and child support payments because of the underground economy. The report recommended that courts take action to adjust child support payments to avoid driving some parents to work off the books because they can't afford their current or back payments. It also says the state should make doing business underground more difficult and costly. Corrigan got her first real glimpse of the size of this business several years ago when she was considering an appeal of an armed robbery conviction. The defendant, a construction worker for a contractor based in the Thumb, was convicted of stealing some $300,000 in cash from his boss's safe. It was a handsome payday for the defendant, who along with his construction colleagues was accustomed to receiving his weekly wages in crisp currency. "The case took care of the armed robber who used the gun to commit his crime, but there was no sense that anything was done to prosecute the owner of the company for paying his employees in cash, thereby avoiding state and federal taxes," said Corrigan. "That case really piqued my interest on a problem that I figured had to be of epic proportions." "We know the problem is big, but I'm not really sure that we really know how widespread it is," Corrigan said. "It has many tentacles." The former chief justice of the state Supreme Court got a firsthand look at its spread as the chair of the Michigan Underground Economy Task Force, a blue ribbon panel that was formed in June 2008 to chart the path of the multi-faceted menace. Individuals "conceal their income from the IRS, from state tax authorities, and from courts and agencies that collect child support," said Corrigan, who for the past 8 years has overseen the administration of child support in the state court system on behalf of the Supreme Court. The money that stays out of the reach of the taxman also is putting a severe crimp in court-ordered child support payments, she indicated. "Consider that in 2008 our state collected $1.45 billion in child support," she related. "We have a statewide arrearage of more than $9 billion. Even if we attribute 70 percent of that arrearage to parents who can't afford to pay what they owe, we still are left with almost $3 billion of uncollected child support that is owed by parents with an ability to pay - many of whom are earning income under the table." The task force focused its work on three areas -- prevention, collaboration, and enforcement. The first is aimed at "trying to prevent non-custodial parents from fleeing into the underground economy in the first place," according to Corrigan. The second, collaboration, is focused on breaking down barriers to inter-governmental cooperation; while the third, enforcement, is geared toward identifying those "techniques that will successfully collect from those who make their living in the underground economy." The Michigan task force, when viewed on a national scale, is going it alone, serving as a "pioneer" in efforts to address the problem, according to Corrigan. The states of California and Massachusetts were early advocates of similar studies, but decided to postpone any such undertakings, perhaps waiting to see the results of the Michigan report. Now, the spotlight is shining squarely on Michigan, hopefully for the good of the nation. Published: Thu, Jul 1, 2010

––––––––––––––––––––
 Subscribe to the Legal News!
 https://test.legalnews.com/Home/Subscription
Full access to public notices, articles, columns, archives, statistics, calendar and more
Day Pass Only $4.95!
One-County $80/year
Three-County & Full Pass also available