The Bear Stearns report this article cites is two years old now…things have not gotten any better.

Here is a link to the original report.

This from Barron’s on the report:

The Underground Economy
Illegal Immigrants and Others Working Off the Books Cost the U.S. Hundreds of Billions of Dollars in Unpaid Taxes By Jim McTague
Barron’s Magazine April 2005

America has two economies: First, there’s the legitimate economy, in which craftsmen are licensed and employers and employees pay taxes. Then there’s the fast-growing underground economy, where millions of nannies, construction workers, landscapers and others are paid off the books, their incomes largely untaxed. The best guess as to the size of the output of this shadow economy is about $970 billion, or nearly 9% that of the real economy. It could soon pass $1 trillion.

What is largely fueling the underground economy, experts say, is the nation’s growing ranks of low-wage, illegal immigrants. The government puts this population at 8.5 million, but that may represent a serious undercount. Robert Justich, a senior managing director at Bear Stearns Asset Management, makes a persuasive case in a recent research report that illegal immigrants actually number 18 million to 20 million. If that’s true, the economic implications are profound and could help shape this year’s debates over both immigration policies and tax reform.

Measuring the size of the underground economy is tough, since most of its denizens seek to remain anonymous. But convincing anecdotal evidence and a number of academic studies suggest that it is expanding briskly-probably by an average of 5.6% a year since the early 1990s, edging out the real economy.

In the process, the underground economy is undermining the effectiveness of the IRS. If the IRS could collect all the taxes it says that it is owed from the underground economy in a given year, then the current budget deficit would disappear overnight. And if the IRS could collect these taxes every year, then the nation would have surpluses far into the future. The IRS has estimated that its tax gap-the amount of taxes owed minus the amount collected-is around $311 billion in any given year. A new estimate due out this year could be as high as $400 billion, says former IRS Commissioner Donald Alexander

Read the rest here and try to convince yourself that giving the more than 20 million illegals a path to citizenship- again- will solve the problem or discourage 20 million more from coming.

Bonus education: from Joel Millman
Staff Reporter of The Wall Street Journal
America the Irresistible
Conditions at Home Improve, but Foreigners Still Want to Come Here

Over the decades, the search for economic opportunity has led millions of foreigners to leave their homelands and seek better fortunes in America, legally or illegally. But if economic conditions improved in other countries, wouldn’t these foreigners be more tempted to stay home?

The U.S. has long believed that they would, and that assumption has been the basis for some of Washington’s free-trade policies that aim to spread economic growth throughout Latin America.

The reality, however, is the very opposite. Economic and social trends in Latin America, including improved growth and liberalized trade and travel among its nations, are actually creating new incentives and opportunities for would-be migrants to head for the U.S. More here.