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WA State bill would “reign in” ‘underground economy’

Commentary by Trent England
Freedom Foundation

Posted 3/20/2013

Olympia, WA – The bill with the narrowest margins to pass the House so far this year is HB 1473, which would create a new paperwork requirement in the construction industry. A new form would have to be filed with the state anytime “an entity in the course of business makes a payment to a construction service provider of $600 or more in a taxable year for construction services.”

The bill is an attempt to address the “underground economy.” A better way might be to consider why there is an underground economy in the first place. The term applies to business activities that are otherwise legal but conducted in violation of government rules. Often, the penalties are severe. Why do some people take the risk of violating the law when they engage in otherwise legal activities?

Some people do it simply because the laws and regulations are so complex. In this way, the expansion of government regulation has a regressive impact on those who simply lack the intellect or education necessary to navigate bureaucracy.

Most people, of course, do it for money. But there’s nothing inherently nefarious about that, since that’s the same reason people are engaged in the above-ground economy. Some bad actors go underground to make even more money. But some people are in the underground economy because they believe–and many are surely correct–that the cost of complying with government regulations is greater than their personal or business profit margin. To put it more succinctly, their choice is to abide by the law or to earn a living; they cannot do both.

Philosophers used to debate whether it was right or wrong for a man to steal a loaf of bread to feed his family. Today, in our highly regulated society, we might ask whether it is ever right for a man to fail to file government paperwork in order to feed his family.

The regulatory state has no doubt about the answer to this question. That’s why HB 1473 makes clear that even an inadvertent violation of the new law would be subject to a fine of up to $1000. If lawmakers want to address the underground economy, they might start by recognizing that it is lawmakers and regulators themselves who have driven many businesses and workers underground, and driven others out of business and out of work altogether.

In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. [Ref.]

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