December 10, 2019
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Standing up to tax fraud in the construction industry

George Danby | BDN
George Danby | BDN

In Maine, local families work hard for what we have, so we have to do what is necessary to keep what we’ve earned.

That’s why the people of Maine don’t deserve to be cheated through widespread illegal activities running rampant in the construction industry. Each day, criminal contractors commit blatant fraud by neglecting to pay their fair share of employment and payroll taxes and pocketing the money for themselves. These tax fraud schemes are costing the American people up to $2.6 billion a year in lost federal and state income. That’s $80 every second.

Dishonest recordkeeping practices pave the way for this nefarious activity. An estimated 1.2 million construction workers — that we know of — are paid “off-the-books” each year, enabling contractors to intentionally avoid their legally required tax obligations and exploit workers. Without employment records, it becomes difficult to enforce laws designed to protect against unsafe job site conditions and unpaid wages for completed work.

Approximately 300,000 construction workers nationwide are identified as “independent contractors” but are, in truth, working as employees. The so-called independent contractor unfairly shoulders the tax and other employment obligations. Off-the-books and mislabeled workers lose out on critical protections and benefits, such as workers compensation, overtime, unemployment, social security and retirement.

Criminal contractors don’t pay employment taxes, don’t address their workers’ needs, and can gain up to a 30 percent advantage on labor costs. The low bids they use to attract jobs are, in turn, artificial. Businesses who do their work with integrity can’t compete and lose the fair chance for potential work. What results is a downward spiral that cheapens the value of work done legally and ethically.

When tax pools get shortchanged, potential funding decreases for important public services such as education, infrastructure, Medicaid, Social Security and first responders. Stopping contractors from stealing takes our tax dollars out of their hands and puts it back toward the public good. That means more one-on-one teacher time students, better futures for our kids, and a brighter economic outlook for our state. More funding from taxes that are properly paid means our police force can combat the drug epidemic, and that we can finally fix the infrastructure problem that is long running. All of these improvements are possible without adding to our deficit.

It’s clear that the people of Maine will not tolerate fraudulent behavior in the construction industry. On April 19, they rallied during a press conference with Carpenters Local 349 to fight these unsavory practices of tax fraud and misclassification of workers in the construction industry. The event was held in conjunction with the April 15 national tax deadline to elevate the conversation and take a stand against tax fraud in the construction industry. Union carpenters were on site to spread the word of how exactly these contractors are getting away with what they’re doing, and how exactly locals are impacted.

We need to rebuild trust and transparency in the construction industry. Our state representatives and attorneys general need to ensure that contractors and labor brokers are held accountable for any fraudulent activity. The Maine Legislature’s recent move to reform our workers’ compensation system is a step in the right direction and will definitely help us in fighting misclassification of workers in the industry, but there is still a long way to go.

The people of Maine deserve justice for the lost tax dollars that help towns survive. Developers who retain criminal contractors need to be held responsible and penalized accordingly. Tax dollars should be recovered and returned for projects that have engaged in any form of tax fraud, especially if they were completed with the aid of tax breaks.

Now is the time to join in on this momentum and encourage your state and local representatives to act, and insist that developers and future projects be conducted in legal and ethical ways.

We can protect Maine’s funding for essential community services.

John Leavitt is a New England Council of Carpenters regional manager and a member of Local 349.

 



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