Whenever a business operates outside the legitimate economy several problems arise. When a business attempts to conceal its activities they may do so to avoid taxes, safety regulations, wage laws, and required insurance policies (i.e. workers' compensation insurance). Doing so exposes the employees of that business to the possibility of uninsured injuries, denial of unemployment benefits, and eliminates incentives to operate the business safely. Uninsured injuries cost the Commonwealth and its legitimate businesses millions of dollars each year. Similarly, avoiding unemployment insurance (UI) creates unfunded liabilities that cause artificially high UI premiums. Such businesses also seek to avoid paying their fair share of taxes. Such revenues are required for the state to provide basic services to its residents.
When added together, operating outside the law allows unscrupulous businesses to have an unfair advantage by way of illegitimately lowering costs and can therefore underbid all others. This takes business away from law-abiding businesses and their employees who are trying to make an honest living. The ultimate impact is an erosion of our social fabric, economic stability, and working conditions in the Commonwealth.
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