Task force releases report on Michigan’s underground economy

LANSING — A new report from the Michigan Supreme Court’s Michigan Underground Economy Task Force released Wednesday is shedding light on secret and often illegal movement of money around the state.

The report makes recommendations on how the state can bring those involved in the underground economy back onto taxpayer rolls and help impact child support payment enforcement.

“We are attempting to open a national dialog with our report,” said Justice Maura Corrigan.

According to the report, the IRS estimates that $345 billion in tax revenues are lost to the underground economy annually. Corrigan told reporters on Wednesday that Michigan’s share of that national burden is estimated at $5 to $7 billion annually. On top of the $345 billion in lost tax revenues, the report says that nationally there is $105 billion in outstanding child support payments as of September 2008.

The extent or growth of the underground economy specifically in Michigan was something the task force said it could not address with perfect accuracy, but it did note a recent study which found that improper classification of employees as contractors in the construction field may have cost Michigan as much as $50 million in tax revenues.

The task force identified several inputs to this underground economy, including the unreported exchanges of goods or labor for cash equivalent, employer mis-classification of employees as independent contractors or casual employees, and crime.

The task force report noted that barter systems — which are systems designed to exchange goods or labor for cash equivalents — are being reported to the IRS, but the task force was unable to identify any network which was filing notice of transactions with the state treasury. Daniel Bauer, a staff member of the task force, said the group had identified 15 or 20 such networks in the course of its investigation.

“It should be looked further into,” he said. He noted that there are up to 400,000 such exchanges operating around the nation.

The task force recommendations were specific to child support obligation collections. Michigan Department of Treasury spokesman Terry Stanton said the department had not yet had an opportunity to review the report, and thus was unable to comment on the findings.

In order to increase enforcement, the task force is recommending more cross agency sharing of information. This would allow Immigration and Customs Enforcement officials to share information with child support enforcement programs; allow cross referencing of state databases to identify casino winnings of those who owe child support or those who have received a cash settlement; and allow child support programs to move in on assets identified in forfeiture cases in the event a not guilty finding is made in legal proceedings, among other things.

Child support enforcement officers should also receive training from the IRS on how to detect hidden financial assets, the report says.

Also recommended by the task force is the ability to search for season ticket holdings, seize those tickets for child support arrears and sell them. The task force also recommended sending personalized “wanted posters” with failure to pay bench warrant notifications.

A wanted poster program is currently underway in Oakland county, said Suzanne K. Hollyer, director of the Oakland County Friend of the Court.

“We have found more people coming in voluntarily,” Hollyer said of the program. “I think it is shame. I wouldn’t want my name and face under a sign that said wanted.”

But the report recommends more than just punitive approaches.

Jackson County Circuit Court Judge Chad Schmucker said the child support system has to do a better job of working with indigents with support obligations.

He said that while Michigan law allows for jail inmates and prisoners to seek temporary stop orders for support orders, few prisoners know of the option or take action to get the orders. The result, he said, are prisoners leaving the system under a staggering debt.

“It doesn’t seem fair to them when they can’t work while they’re in prison [to accumulate the debt],” said Schmucker. “They do the math.”

The task force also recommended more up front involvement before cases got into the thousands of dollars of arrears arena. In that instance, the task force is recommending more interaction with noncustodial parents to address support orders. Schmucker said as a judge he can’t erase past debt, he can only address current debt.

Former State Treasurer Doug Roberts, who currently works for the Michigan State University Institute for Public Policy and Social Research, says there has to be a way to help noncustodial parents erase some of the staggering debts they have incurred. He said one such option would be a program which helped erase part of that debt as a reward for on time payment in full each month for three years.