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Underground Economy Robs State of $8 Billion a Year

Locals including port police and state officials say crimes including human trafficking and the sale of harmful products are costing the public, and Sacramento's fighting back with a new bill.

Illegal activities are not only putting Californians in danger but are also robbing the state of $8 billion annually, reports the Board of Equalization, which is taking measures to combat lost revenue wrought by criminal enterprises.

Human traffickers, counterfeiters, smugglers and many others make up what has been dubbed the “underground economy”. In response, the BOE sponsored Senate Bill 1185 that, if passed, would link several agencies into a Central Intelligence Partnership, including the BOE, Employment Development Department and Franchise Tax Board.

Introduced by Sen. Curren D. Price in February and amended twice since then, the bill in its current state would institute the pilot program by July 1, 2014 to run through Jan. 1, 2018, unless a statute is enacted to prolong it.

In an effort to spread awareness of the bill, the BOE is holding a news conference Tuesday at 10:30 a.m. at Fire Station 112 in San Pedro devised to help the public identify fraudulent and possibly unsafe products.

Los Angeles Port Police Chief Ronald Boyd and L.A. County Sherif’s Department Commander Todd Rogers will be joined by BOE Chairman Jerome E. Horto and Vice Chair Michelle Steel for a demonstration of confiscated counterfeit items including sunglasses, purses, jeans and even pharmaceuticals.

Sales of fake products are not only robbing California of taxes that could be used for hospitals and schools at the same time California Gov. Jerry Brown is urging statewide budget cuts due to a $16 billion shortfall, but many of the products seized contain lead and other harmful ingredients, according to the BOE.   

California’s underground economy has been estimated to generate between $60 and $140 billion a year, according to an analysis of Internal Revenue Service data by the Employment Development Department, as stated in the bill.

Additionally, California is one of the top destinations in the country for human trafficking, a serious problem that a few weeks ago prompted the unanimous passing of Senate Bill 1133 sponsored by Attorney General  Kamala D. Harris.

That bill prevents those convicted of human trafficking crimes involving minors from keeping any related financial gains.

Luis June 12, 2012 at 02:28 PM
More prohibitionist laws are not going to solve the problem. Put people to work in real jobs with living wages so they don't have to go underground to make a living. These laws only create and prolong the cat and mouse approach to law enforcement as people become better at avoiding the law and paying taxes.
John B. Greet June 12, 2012 at 03:19 PM
It seems to me that we have sufficient state-level enforcement entities with which to address crime. What this seems most about is Sacramento adding another layer of bureacracy to try to capture still more tax revenue, rather than placing the budgetary focus where it rightly belongs....cutting spending.
Dennis June 12, 2012 at 03:47 PM
Why a new law. Use the old ones. Why do politicians always say we need more money for schools and hospitals when the money goes to welfare, political payback, and increased government employee benefits? Wait, I know the answer.

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