The Underground Economy

April 6, 1984

Report Outline
Thriving Hidden Economy
Size and Implications
Closing the Tax Gap
Special Focus

Thriving Hidden Economy

Tax-Time Interst in ‘On-The-Side’ Work

I usually charge $100 for the job,” said the repairman, “but it will cost you $90 if you pay me in cash.” Millions of American consumers have received discount offers like that; many have accepted and pocketed the savings. Others have bought goods from roadside stands or street vendors, or had such services as home improvement, car repair, housekeeping or hairdressing performed by “moonlighters,” people working “on the side.” The consumers were participating, whether they realized it or not, in what many observers have described as America's “underground economy.”

Some of the terms used for these economic activities—“underground,” “subterranean,” “black”—conjure up visions of cigar-chomping gangsters, drug pushers and slick confidence men. But outright illegal activities make up just a small part of what many analysts regard as the underground economy. Some see this economy in a neutral rather than a negative sense and call it the “informal,” “hidden” or “irregular” economy.

Most of the activities described in literature on the subject are quite legal. What separates them from normal business transactions is that they are unrecorded and, often, unreported to tax authorities. It is not surprising, therefore, that public awareness of the underground economy is heightened at this time of year, as the deadline for filing individual federal income tax returns approaches.

ISSUE TRACKER for Related Reports
Underground Economy
Mar. 04, 1994  Underground Economy
Apr. 06, 1984  The Underground Economy
Sep. 09, 1943  Black Markets
Data and Statistics
Small Business
Tax Collection