This is an interesting read, although I’m not sure what the agenda is here. Are they trying to say that more should be done to bring the shadow economy under the gaze of the IRS to increase tax revenue? Frankly, it will never happen.As long as cash exists, there will be people who use it to circumvent taxes.
Even without cash, there are still ways of getting arround anyone ever finding out about income. Bartering is a great example. I have a now-deceased relative who owned a paving business. He never once paid for a car the entire time he owned the business. If he needed to replace his current ride, or get something for one of his kids, he would pave somebody’s driveway for free in exchange for the car they were trying to sell!
I also disagree with the idea of using electrical usage to determine the size of the economy. There are too many factors that can undermine that estimation, such as energy efficiency measures and the fact that many side incomes can be done without using a single watt of extra electricity. Take a babysitter. Whether the babysitter comes to the children, or the children go to the babysitter, only one place is going to have lights on. So, less electricity is being used. Meanwhile, when the neighbor kid mows your lawn, gasoline is being used, but not electricity. Even worse, for that example, the same amount of gas is being used whether you paid somebody to do it for you or if you did it for yourself.
So, at the end of the day, the size of the shadow economy is probably vastly under-estimated. I’ve heard estimates that the underground economy is actually larger than the visible one. I doubt that is true either, but it shows just how useless trying to come up with a number is.
Infographic courtesy of Wallace & Associates APC.