01.30.13

Wage Theft and Bidness Cheats

Posted in Around The State, Had Enough Yet?, Taxes at 10:55 am by wcnews

Scott Braddock posts at Contruction Citizen on a new report about working conditions for construction workers in Texas, UT Research: Over 40% of TX Construction Workers are Misclassified.

Researchers at the University of Texas back up what we’ve been saying at Construction Citizen for years: far too many construction workers in Texas are the victims of payroll fraud.

They released a study this morning in Austin called “Build a Better Texas”.

Among the study’s findings:

  • Wage theft results in lost tax revenue: at least $117 million in lost wages and $8.8 million in lost sales tax revenue impact cash-strapped state and local governments.
  • Texas construction workers are forced to fall back on public safety nets to support their families. Low wages and wage theft contribute to economic instability for construction workers and their families. Fifty-two percent of Texas construction workers report that they were unable to meet the basic needs of their family at some point.
  • Injured construction workers account for a disproportionate share of uncompensated care costs in Texas hospitals. While construction workers make up roughly 6% of the workforce, hospital data suggest that they account for nearly 20% of work-related uncompensated care costs in Texas emergency rooms.
  • Rampant payroll fraud results in an estimated $54.5 million in lost unemployment insurance tax revenue and hundreds of millions more in federal income tax.  With over 40% of the construction workforce misclassified as independent contractors or paid under the table, Texas – and the federal government – are losing out on critical revenue.

And he points out that legislation has bee,n and will be filed, this legislative session to try and fix the problems. Here’s the link to the report, Building a Better Texas, by the Workers Defense Project.

Here’s more from the Texas Tribune, Report: Employee Misclassification Costs State Millions.

Even during the depths of the national financial crisis, Texas led the country in home construction, and the industry employed more than 950,000 people in Texas.

But many in the industry say it is also a breeding ground for payroll and tax fraud, and rife with employers who knowingly misclassify their employees, a practice that perpetuates the hiring of illegal workers. Industry moguls and researchers discussed such issues Tuesday at the Capitol, addressing the results of a yearlong research project on conditions in the industry by the Workers Defense Project and the University of Texas at Austin’s Division of Diversity and Community Engagement.

The study, titled “Build a Better Texas,” said that more than 40 percent of construction workers in Texas — about 300,000 — are either misclassified or paid under the table. The result is more than $54 million in lost unemployment tax revenue. Payroll fraud in Texas translates to about $1.06 billion in lost federal income tax revenue, according to the study. [Emphasis added]

[...]

The study comes at a time when construction leaders have been busy lobbying lawmakers to address what they claim is a loophole that allows employers to purposefully misclassify their employees as independent contractors or subcontractors, also called “1099” employees — named for the employment form they fill out. Employers can use this subcontractor classification to avoid paying payroll taxes, workers’ compensation and overtime.

[Stan Marek, the president and CEO of the Marek Family of Companies] has testified before the Texas Workforce Commission several times, hoping the commission will push lawmakers to fix the problem. He said Immigrations and Customs Enforcement has increased its inspections of I-9 forms, the federal employment eligibility verification. But workers found to be ineligible to work here are not always deported. Instead they’re often forced to go into an underground, cash-based economy if an unscrupulous employer is willing to misclassify the employee as an independent contractor.

Marek said a key component in solving the issue is comprehensive immigration reform at the federal level. He acknowledged, however, that if state lawmakers address the construction industry’s concerns but immigration reform fails to occur, it could mean a shortage of workers.

This is an issue that both sides can agree needs to be fixed. The only one’s that will fight these laws are the ones currently profiting from breaking them – bidness cheats. And we all know if this was this was a safety net program for poor Texans Perry and the wing nuts would be screeching, and want to drug test those involved.  This drives wages down for all workers in Texas and profits up for the cheaters.

This is a litmus test issue for our elected leaders in Texas. If they continue to stay silent on this, then we’ll know they think it’s alright for these people to scam the taxpayers of Texas.

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