Tax day on April 15 is also Construction Industry Tax Fraud Day of Action, a time to reckon with companies that dodge paying their fair share.
The construction industry is a well-known haven for companies who misclassify their workers, don’t pay taxes, and ignore laws aimed at ensuring safe job sites and protecting workers from exploitation.
Keeping employees off the books is an illegal practice common in the construction industry that benefits suspect contractors — at the expense of taxpayers — who line their pockets with ill-gotten profits that should be going instead to local, state, and federal taxing authorities. These tax cheats fail to pay their workers fair living wages, rarely provide medical coverage, while also evading federal, state, and local taxes, overtime, and workers’ compensation premiums. This gives them a substantially competitive edge when it comes to bidding on both public and private jobs against law-abiding contractors who absorb all the costs related to paying taxes and other health and worker’s compensation benefits.
The advantage is clear in the bidding process when these contractors are able to underbid law-abiding contractors because they have fewer or no ancillary benefit-related expenses, and more wiggle room in their profit margins with cheaper, under-the-table labor. A study by the IRS found that “15 percent of all employers misclassified their workforces, with the construction industry being the worst violator, at 19.8 percent,” an estimated yearly loss of $2.72 billion. To add insult to injury, this information is from 1984. There has not been a comprehensive IRS study into the impacts of tax fraud since then, making needed enforcement and understanding of this serious issue even more difficult.
Most Americans do pay their fair share of taxes, and there are consequences for those who violate our tax laws. Aside from the dramatic impact on our federal treasury — estimated to be $450 billion a year in lost revenue — state and local governments throughout the country lose millions each year when construction and other companies pay their workers off the books, or intentionally misclassify them as “independent” contractors.
We all pay the price in higher taxes, less services from our local governments, and fewer resources for our children’s schools. This lost revenue could have been used to support police, firefighters, and first responders, upgrade or build new schools, pay teachers living-wage salaries, reduce class sizes, improve local roads and highways, and provide a litany of other critical items.
As Americans get ready to files their taxes with the Internal Revenue Service on April 15, the United Brotherhood of Carpenters and Joiners of America will be holding several coordinated rallies and press events throughout the country in recognition of Construction Industry Tax Fraud Day of Action, including lobbying elected officials, rallies to educate members and the public about tax fraud, and job site visits to highlight tax cheats in the construction industry who misclassify workers to avoid paying their fair share.
It is time our elected officials and government at all levels take action and begin enforcing laws already in place to stop this theft of much-needed revenue from our local, state, and federal treasuries.
As the regional leader of one of the largest construction trade unions in the U.S., I speak on behalf of our 43,000 members of the Keystone-Mountain-Lakes Regional Council of Carpenters that we not only want increased enforcement of existing tax fraud laws, but also the establishment of laws to ensure that all employers pay their fair share in taxes — to support the needs of our communities and their families. When contractors cheat on their taxes, we all pay more.
For more information on the misclassification of workers and the consequences to taxpayers, go to: http://standinguptotaxfraud.net/.
William C. Sproule is executive secretary-treasurer of Keystone-Mountain-Lakes Regional Council of Carpenters, part of the United Brotherhood of Carpenters & Joiners of America.