Please Contact Your State Representatives Today

Assemblyman Tom Harman (R-Huntington Beach) has introduced legislation to prevent employers from deducting as a business expense the wages paid to an individual who is in this country without legal documentation.

This bill is bad for all California businesses, big and small, because it attacks employers by not allowing them to deduct as business expenses the cost of hiring our undocumented brothers and sisters. This bill has the same affect as raising taxes on businesses and giving the money to the state government in turn reducing the amount of money in private hands which is needed for economic growth.

BACKGROUND

Heretofore, our undocumented brothers and sisters have contributed immensely to the California economy and the American economy as a whole. Indeed, every Californian enjoys a higher standard of living today and much of that is because of the contributions made by undocumented workers, who are treated like criminals and not allowed to enjoy basic civil privileges such as driving, collecting Social Security benefits, even though they contribute like everyone else, or have access to basic health services available to the working poor.

So called "employer sanctions" will not do anything to stop business’ demand for labor and in no way will punish employers who hire undocumented workers. This bill will only create a tax that will in turn be passed on to consumers who will be forced to pay higher prices for goods and services. In addition, this bill could have a stagnating affect on the California economy as a whole. A stagnant economy always has a greater impact on our Raza as we are some of the first to feel it, it hits us harder and we’re among the last to recover from a stuck in the mud economy.

ACTION NEEDED

Please call or write your CA Assembly member and state Senator today and ask them to defeat AB 2680. You can call, send a fax or e-mail.

If you have a business that turns a small profit, and you cannot deduct the cost of one worker whose pay is, say, $15,000 a year, your tax hit is only about $3,000 (that's 20%). Most businesses turn a modest profit, because the owner eventually incorporates and pays him or herself a salary (meaning that salary is deducted as an expense). This tax hit can be absorbed by lowering wages a little and raising prices a little. It could also drive more businesses into the cash economy.

How about firing the illegal and hiring a legal resident.

A business will, if the resident can do for $18,000 a year what the undoc will do for $15,000. That will be the case in some jobs, but not in others. Also, it depends on having a market that will support the increase in prices. Some will, and others won't, but most will.

The only thing I wonder about is if it will lower wages. It's possible that better paid, more skilled workers will get fired, and then enter the lower-skilled labor market. This, combined with the tax hit, might increase unemployment and lower wages.

So, you might find some worker who makes $25,000 a year is fired, and is competing for a $13,000 a year job against someone who may or may not be legal. In some situations, hiring this skilled guy is totally worth the risk, because, for only around $15,000, you get to buy $25,000 (or more) worth of skills and talent. An entrepreneur could probably start a side business to "use" the worker until he figures out a situation to avoid this tax hit (like working for cash).

Right? Like, say you hire a guy to help do cleanup on your small remodeling jobs. You suddenly find the market has several undocs who know how to do carpentry, working for peanuts. So you hire one, and start finding simple cash jobs, like fixing floorboards, or windows, or other fix-it work, for cash. When you get found out (IF you get found out), you just pay the extra tax. You don't care, because you made three times that in profit.