Last week, in the wake of mass arrests in 26 states, the Department of Homeland Security announced a crackdown on employers of illegal immigrants. Secretary Chertoff was all smiles (I think, who can tell with that guy?) as he declared:

“Law enforcement officials will ‘use all the tools we have, whether it be criminal enforcement or immigration laws to break the back’ of businesses that exploit undocumented immigrants, said Homeland Security Secretary Michael Chertoff at a news conference.
‘We’re looking at them in the same way we look at criminal organizations,’ he said.”

Of course the last time I checked most mobsters at least have to spend the night in jail. Maybe the five hours between the time the workers were picked up and the time they began releasing them was enough to drive IFCO systems into bankruptcy, but somehow I doubt it. Maybe the company can’t function without the seven mid-level managers that were arrested.

Last week’s raid was apparently triggered by an audit by Social Security Administration which found that 53% of the employees at IFCO systems had faulty numbers. After 13 written warnings I guess the Feds had enough. That still leaves the question of what would have happened had IFCO been a little proactive and made the employees in question get valid Taxpayer ID Numbers. The IRS doesn’t check an immigrant’s legal status when issuing those numbers.

More revelations about how the IRS and the Social Security Administration help in the effort to catch illegals:

source: The Seattle Times

• The Internal Revenue Service (IRS) and the Social Security Administration (SSA) collect data including names and addresses of people using bogus Social Security numbers and the bosses who hire them.
• The agencies don’t analyze the data to find immigration fraud — and they won’t share their records so other can do that, either. They say privacy laws prevent it.
• The IRS doesn’t fine employers who submit inaccurate data about workers even if it is done repeatedly. If your SSN is being used by someone else it is unlikely you will be told by the Social Security Administration.
• One internal study found that a restaurant company had submitted 4,100 duplicate Social Security numbers for workers. Other firms submit inaccurate names or numbers reports for nearly all employees. One child’s Social Security number was used 742 times by workers in 42 states.

Looking at the above you may be wondering why the IRS and SSA are reluctant to to provide information to immigration authorities:

“The IRS wants to protect the privacy of its records because disclosing them might cause companies and employees to stop reporting income and paying taxes — and go underground where exploitation is more certain.

‘At least now,’ IRS Commissioner Mark Everson told Congress in February, ‘we are collecting some taxes in these areas, and we are working to collect even more.’”

The records ICE wants and that DHS Secretary Chertoff has requested are the reports sent by employers which document the money withheld for taxes and Social Security.

Almost half of the inaccurate reports come from such industries as agriculture, construction and restaurants, which rely on illegal labor.

In other words its all about the Benjamins baby.

The next question I’m sure that you the discerning reader is asking is, “How bad is it?”

According to internal federal studies:

• About 8,900 of the nation’s 6 million employers accounted for 30 percent of inaccurate reports.
• Ten states account for 48 percent of the U.S. work force but have 72 percent of the unmatched earnings reports.
• Some companies repeatedly have reporting problems, including 40 that made the worst 100 list repeatedly over eight years. One company submitted 33,000 errant earnings reports in a single year.

Couple the catch and release policy that apparently remains intact with a failure by the IRS and the Social Security Administration to coordinate with ICE or apparently to conduct meaningful enforcement on their own, as well as an apparent unwillingness to hold senior management accountable, and you have a policy that causes some inconvenience but otherwise preserves the status quo.

Why does this matter to you? We have previously discussed wage deflation and the impact on social services, but this can have a more personal affect. Years of lax enforcement has driven up the demand for low cost labor, which has driven a demand for Social Security Numbers. Enter Identity Theft.

Although the government and the credit agencies downplay the impact, do you really want to be called in for an audit because someone else is using your SSN and the IRS wants you to account for the income, or have your home loan disapproved because of credit discrepancies caused by someone else using your identity.

President Bush is correct when he says we can’t feasibly deport 12,000,000 people, but look at these numbers again:

• About 8,900 of the nation’s 6 million employers accounted for 30 percent of inaccurate reports.
• Ten states account for 48 percent of the U.S. work force but have 72 percent of the unmatched earnings reports.
• Some companies repeatedly have reporting problems, including 40 that made the worst 100 list repeatedly over eight years. One company submitted 33,000 errant earnings reports in a single year.

Those are manageable numbers. If you send 40 CEOs to prison and fine the other 8,860 until their ears bleed and their kids have to beg for quarters on street corners, you will dry up that source of jobs fast. Once that happens border security will improve and we can start normalizing the workers who remain.

By the way May 1st is the national work stoppage or whatever it is being called. I advocate calling for a week of no private money transfers to Mexico. Hopefully someone in the Treasury Department will pick up on that idea.

This entry was posted on Tuesday, April 25th, 2006 at 8:00 pm by Chad and is filed under Big Thoughts. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.