UBC: $2.6B in taxes lost yearly to under-the-table pay

Author: Kim Slowey
Published: March 19, 2019

The United Brotherhood of Carpenters (UBC) has levied a serious charge against the U.S. construction industry – that it is shorting the American taxpayer to the tune of up to $2.6 billion each year by making under-the-table payments to more than a million workers. In Texas alone, the losses reportedly top $1 billion.

Prevailing wage proponents and research group Smart Cities Prevail provided the estimates to the UBC.

The UBC adds to that figure about 300,000 independent contractors that the organization maintains are really misclassified employees, forced to work as independents so that employers don’t have to pay them benefits, cover them with workers’ compensation insurance or make federal and state tax payments on their behalf.

“That’s shocking,” said Frank Spencer, UBC general vice president. “Think about it: The number of construction workers forced to work off-the-books is about four times greater than the number of misclassified workers. There’s no mistaking the blatant tax fraud.”

Small, legitimate independent contractors, however, do have a place in the industry, providing critical services and often supplementing the construction industry labor pool, a sentiment echoed by Kristen Swearingen, the Associated Builders and Contractors’ vice president of legislative and political affairs.

“Independent contractors are an important part of the construction industry, and ABC supports efforts to provide a clear, concise and reasonable definition thereof,” Swearingen told Construction Dive. “Any independent contractor reform effort must recognize that independent contractors are necessary, productive participants in the construction industry and their ability to contribute to the marketplace must be preserved.”

Generally, in order to qualify as an independent contractor under the Internal Revenue Service’s rules, the individual must be free to control the details of how he or she accomplishes the work.

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