The U.S. Underground Economy...

yukon

Banned 9 years ago

Either the story is fake or the women is an idiot for outing her basement business.

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Joe Mobley

9 years ago

Good story TL.

Of course I can not speak to the numbers but the premise seems more than reasonable. I would not be surprised if this goes on all around us.

Joe Mobley

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TLTheLiberator

9 years ago

Originally Posted by Joe Mobley

Good story TL.

Of course I can not speak to the numbers but the premise seems more than reasonable. I would not be surprised if this goes on all around us.

Joe Mobley

Just trying to have a little fun Joe.

If the U.S. yearly economy is about 20 trillion the underground has got to be at least 5% which would only be 1 trillion of economic activity.

Of course there's the illegal drug trade. I wonder what are the numbers on that?

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Kurt

9 years ago

Originally Posted by TLTheLiberator

Just trying to have a little fun Joe.

If the U.S. yearly economy is about 20 trillion the underground has got to be at least 5% which would only be 1 trillion of economic activity.

Of course there's the illegal drug trade. I wonder what are the numbers on that?

420? 714?

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David Beroff

9 years ago

I have no idea as far as the exact numbers, but I do take exception to the stated ratio for unpaid taxes for this "underground economy". The article implies a 25% tax rate. Most (not all) of Americans who are earning the majority of their income this way are poor, with a tax rate more in the neighborhood of 10%, and that's after deductions, exemptions, and so on. Plus, if this income was declared, there'd also be expenses, i.e., the article's a bit slippery on the point of this money being gross or net, which again makes a huge difference. Yeah, I do realize that all of the numbers are just estimates, but the one "tax gap" statement made by the two guys who are supposedly teaching this stuff just sort of put me off.

The other number that concerns me is the $2T. I'm no economist, and I'm going to be incredibly rough with the numbers here, but let's just say that 2/3 of the US's 300 million population are adults of working age, or 200M. Let's say that I agree that the number of people who are hiding their full-time income is huge, maybe 20%, or 40M. Again, I'll assert that the vast majority of these will be poor, earning maybe $25K/year. That's still "only" $1T. Am I missing something here?

Put it all a different way: The majority of the country's income is earned by a very tiny percentage of the population. Sure, some of those will also be tax cheats, but I think we can all agree that that income is not going to be in the same category as people selling their junk for cash in their basements, the "underground economy" discussed by this article.

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TLTheLiberator

9 years ago

Here's another article saying the underground economy has probably doubled since 2009 and how it's helping the recovery from the great recession...

$2 trillion underground economy aids recovery

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ThomM

9 years ago

Originally Posted by TLTheLiberator

Here's another article saying the underground economy has probably doubled since 2009 and how it's helping the recovery from the great recession...

$2 trillion underground economy aids recovery

Both articles are a couple years old at least. They both try to make it sound like it's a new thing when in reality it's been going on for many, many years.
My first two jobs as a kid would be considered part of the underground economy and they where over 50 years ago.
Crap for years Cannabis has been considered the largest cash crop in the US and number three here in New York, all part of the underground economy. Here's an article from 2006 about it.
Marijuana Called Top U.S. Cash Crop - ABC News

Thirty States Where Marijuana is One of the Top Three Cash Crops
Average Values 2003 - 2005; Production Values ($1000s) Marijuana Production: Comparison with other Cash Crops

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Joe Mobley 9 years ago

David Beroff,

Good points and interesting thinking. I would agree with your conclusion that a huge majority of the underground economy is generated by lower income individuals.

Joe Mobley
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TLTheLiberator

9 years ago

Related to the underground economy...

6 of the year’s most outlandish drug smuggling attempts - Salon.com

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hardraysnight

9 years ago

is mining part of the underground economy?

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David Beroff 9 years ago

Originally Posted by hardraysnight

is mining part of the underground economy?

Only if they don't catch you! (Trust me, it's not like I haven't considered it around here... best coal in the country, and no one mines it any more.)
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HeySal

9 years ago

Originally Posted by hardraysnight

is mining part of the underground economy?

Cute pun. Not as funny as it might sound, though. There's a lot of cash trade in rock and gem.

Some is barter - which is actually now a form of underground. It wasn't considered so at one time but gov thinks they have a right to extort a price on every damned thing we do or touch now, so barter is a form of economy that avoids tax and regulation.

I can get lapidary done "free" for trading materials with the cutter. That's a lapidary shop not paying taxes on money earned from customers - unreported income. It's me not having to pay for the service (or pay taxes on my end) to get rock cut. I just give them some of what I'm having them cut - so they aren't buying the stone on the normal economy.

In my little town we have people being paid under the table for all sorts of things - mechanics, yard work, dog care, home cleaning, child care...........the list goes on. It's not necessarily "illegal" (remember - prostitutes are taxed in NV where they're legal). It's just the old fashioned free market economics that we'd have if we hadn't been taken over by an extortionary criminal element.

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David Beroff

9 years ago

Originally Posted by HeySal

Some is barter - which is actually now a form of underground. It wasn't considered so at one time but gov thinks they have a right to extort a price on every damned thing we do or touch now, so barter is a form of economy that avoids tax and regulation....

In my little town we have people being paid under the table for all sorts of things - mechanics, yard work, dog care, home cleaning, child care...........the list goes on. It's not necessarily "illegal"....

First, let me stress that I am just as strongly against high taxes and government intervention; I am not "defending" Uncle Sam here.

Barter by itself is neither illegal or underground. One can certainly choose to report the activity as income on one's tax returns. (If each party received identical value, then no income occurs. Funny, though, how barter is one area where participants typically feel that they both came out ahead.)

Similarly, there's nothing wrong with two neighbors conducting a cash transaction. It only becomes illegal if the income isn't reported.

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HeySal

9 years ago

Originally Posted by David Beroff

First, let me stress that I am just as strongly against high taxes and government intervention; I am not "defending" Uncle Sam here.

Barter by itself is neither illegal or underground. One can certainly choose to report the activity as income on one's tax returns. (If each party received identical value, then no income occurs. Funny, though, how barter is one area where participants typically feel that they both came out ahead.)

Similarly, there's nothing wrong with two neighbors conducting a cash transaction. It only becomes illegal if the income isn't reported.

I know you're not the prime Statist, and understand what you were saying.

This is all true - except there's actually been legislation against barter because it's not truly taxable. They have literally gotten that greedy. And -- when people are doing work for cash, do not expect them to report that income. One of the purposes of cash is to keep the money you earn instead of handing it to someone else whose claim to it is actually a false claim.

The way I see it, the only way we will ever normalize our gov or economy again is to get rid of the FED, and bring all the taxing, etc. back down to state level. Fed gov was never meant to have that ability or authority. Waaaahhhhh - how will roads get built? Same way they always did - state by state with interstate efforts. All the fed does it take the money then redistribute it in small portions back to the states - after extorting xx amount for whatever the hell they want to do with it whether we approve or not. The states should be doling funding to them on an as needed basis again instead. People would pay less at the state level and it would be easier to control the economy as there would be less unneeded regulation on small businesses. The state would get enough in taxes to support the state's schools, roads, etc. and the feds would be shackled against acting like the tyrannical savages they've turned into.

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ThomM

9 years ago

Originally Posted by David Beroff

First, let me stress that I am just as strongly against high taxes and government intervention; I am not "defending" Uncle Sam here.

Barter by itself is neither illegal or underground. One can certainly choose to report the activity as income on one's tax returns. (If each party received identical value, then no income occurs. Funny, though, how barter is one area where participants typically feel that they both came out ahead.)

Similarly, there's nothing wrong with two neighbors conducting a cash transaction. It only becomes illegal if the income isn't reported.

I've found with barters that it's more a case of both parties feeling like they got what they want more so then coming out ahead. For example. A friend of mine keeps his wood at my place and splits it for firewood. In return he mows my lawn for me. It's simply an arrangement that works for both of us. We never thought about putting a dollar value on the deal and seeing who came out ahead.
As for your last sentence, that's almost the definition of the black market

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David Beroff

9 years ago

Originally Posted by ThomM

As for your last sentence, that's almost the definition of the black market

Two entirely separate concepts. Dealing in cash in itself is not illegal, and in theory, shouldn't be looked at as such. Can you make a subjective opinion based on someone dealing with cash? Sure, although it may not be correct. When you read in the news about someone being found with large quantities of cash, it seems to always be framed in the sense of, "Why did they have that much cash/Bitcoin/gold, hrm?"

Same issue with privacy: "Why did they want to hide that email?"

Just because criminals want privacy and use cash does not mean that everyone who does is automatically a criminal.

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ThomM

9 years ago

Originally Posted by David Beroff

Two entirely separate concepts. Dealing in cash in itself is not illegal, and in theory, shouldn't be looked at as such. Can you make a subjective opinion based on someone dealing with cash? Sure, although it may not be correct. When you read in the news about someone being found with large quantities of cash, it seems to always be framed in the sense of, "Why did they have that much cash/Bitcoin/gold, hrm?"

Same issue with privacy: "Why did they want to hide that email?"

Just because criminals want privacy and use cash does not mean that everyone who does is automatically a criminal.

"
DEFINITION of 'Black Market'

Economic activity that takes place outside government-sanctioned channels. Black market transactions usually occur "under the table" to let participants avoid government or taxes."Black Market Definition | Investopedia

Dealing in cash is illegal if not declared for tax purposes.

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David Beroff 9 years ago

Originally Posted by ThomM

Dealing in cash is illegal if not declared for tax purposes.

You and I are saying the exact same thing.
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- Claude Whitacre 9 years ago
  
  Because I own a store, I buy a lot of advertising. Nearly all of it is a trade. It's rare that cash exchanges hands. The advertising reps essentially get my products at wholesale (because they are trading at their retail price), and I am essentially buying advertising at wholesale, (Because the items I trade are traded at retail value.)
  
  It's a way for them to make sales they probably wouldn't otherwise, and a way for me to virtually guarantee my ads pay off.
  
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- ThomM 9 years ago
  
  Originally Posted by David Beroff
  
  You and I are saying the exact same thing.
  
  Well it is Sunday.
  
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HeySal

9 years ago

Originally Posted by ThomM

I've found with barters that it's more a case of both parties feeling like they got what they want more so then coming out ahead. For example. A friend of mine keeps his wood at my place and splits it for firewood. In return he mows my lawn for me. It's simply an arrangement that works for both of us. We never thought about putting a dollar value on the deal and seeing who came out ahead.
As for your last sentence, that's almost the definition of the black market

That's exactly how the feeling is in rock/lapidary trade. Who gets the best value? In the long run, probably the person who gets the material for the cut. Do I feel "out" in any way? Not at all. It was a good trade, to me. Not much I could do with that rock if it weren't cut but sell it for less than I can get when it's cut, anyway - or pay for it to be cut. So the trade just works and I'm happy to trade.

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David Beroff 9 years ago

Originally Posted by HeySal

That's exactly how the feeling is in rock/lapidary trade.

You'd get along well with my daughter, 26. She was discussing the tradeoff between grinding stones made of aluminum carbide vs. silicon carbide vs. diamond. I replied: So, if I understand you right...
Those carbides might be enough,
to grind down that other stuff,
but diamonds are a geo-nerd's best friend!

Marilyn Monroe - Diamonds Are A Girl's Best...
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Kurt 9 years ago

Originally Posted by hardraysnight

is mining part of the underground economy?

Yes...along with the cemetery industry.
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- lanfear63 9 years ago
  
  Originally Posted by Kurt
  
  Yes...along with the cemetery industry.
  
  It's a cut-throat industry that, stiff competition.
  
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dvduval

9 years ago

The underground economy is one of the reasons cash will never go away despite people predicting otherwise.

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The U.S. Underground Economy...

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