A couple of weeks ago, Mrs. Groovy and I needed some minor electrical work done on our house. Two outlets and three switches needed to be replaced.
The electrician we hired was very professional and very competent. He took about an hour to do the job, but that was only because he took the time to thoroughly inspect the faulty devices and explain to us what he was doing.
The bill for his time and expertise came to $170. Ninety dollars for a service call and $80 for parts and labor.
When I asked him how he wanted to be paid, he said he preferred cash. I paid him in cash and wished him a good day.
Now a question. Why do you think my electrician friend preferred cash? In what way is cash better than a check or a credit card?
My guess, and I have no way of proving this, is that he preferred cash because he preferred not to share his labor for my particular job with the government. By my paying in cash, there was no proof that the work was ever done. And since there was no receipt, check, or credit card transaction that could be traced back to him or his company, there is no reason for him to declare this income on his 2017 taxes. In other words, since he can’t possibly be caught by the IRS for hiding this income, the amount of taxes he pays on it is completely up to him. If he decides to go the screw-the-government route, he’ll get to keep the entire $170. If he goes the render-unto-Caesar route, he’ll have to pay federal, state, and self-employment taxes and forego at least a third of that $170.
Is Stealing from a Thief Unethical?
Take a look at the above clip from the movie, It’s a Mad, Mad, Mad, Mad World. I suppose at one point in my life I agreed with Jonathan Winters’s character. If you didn’t report all the income that came your way, you’d be “stealing from the government.”
By the time I entered college, however, I lost that conviction. When I was a junior in college, I had an off-the-books job at a bakery. I didn’t make much. Maybe $75 a week. But whatever paltry amount it was, I certainly didn’t declare it on my taxes. How, after all, was I going to purchase the massive amount of beer my gullet required if I shared my earnings with the government?
Later, after college, in my mid- to late-20s, I had a part time landscaping job that also paid off the books. Again, it wasn’t a terrific sum—around $250 a week. But here too, the notion that I should declare this extra income on my taxes never crossed my mind.
I wouldn’t think badly of my electrician friend if he pocketed the entire $170 and didn’t share any of it with the government. Nor do I think my failure to pay taxes on my cash income back in the day was an egregious ethical lapse. I put it on the same level as not coming to a complete stop at a stop sign.
So why? Why do I think it’s all right to ignore off-the-books income come tax time and “steal from the government?” Simply put, our government is too corrupt to warrant our blind obedience to the tax laws. When I see a picture of the United States Capitol, I don’t envision a citadel of democracy, I envision, in the words of humorist P.J. O’Rourke, a “parliament of whores.” Practically everything’s for sale, and our politicians, regardless of party, have proved time and time again that they’re more than willing to sell us out to the highest bidder. Just type “is the united states an oligarchy” into Google, and you will see that some of our most thoughtful thinkers have come to the same sorry conclusion (see here, here, here, and here). Our government only answers to moneyed interests. It doesn’t give a rat’s ass about the common man.
The Underground Economy and Personal Finance
“Okay, okay,” I hear you blurting out. “Our government’s corrupt and you wouldn’t begrudge someone hiding income from it. What the heck does this have to do with personal finance?”
Excellent question. I would never advise anyone to under-report his or her income and cheat the government out of tax revenue. But what about those struggling financially? What about those who are in their 40s or 50s and haven’t saved a dime for retirement? What about the 20-somethings being crushed by student loan debt? And what about the high school dropouts whose prospects beyond a life of grunt work are rather dim? Would I be upset if these individuals found ethical cash-only side hustles (i.e., cutting grass, walking dogs, moving furniture, re-tiling bathrooms, fixing cars, etc.) and used whatever tax-free money they earned to right their financial ships or set themselves up for a dignified retirement? Hell no. The government sure isn’t going to save them.
Here’s the bottom line. It kills me that so many Americans don’t have enough money in the bank to cover a $400 emergency. It also kills me that so many Americans don’t delve into the underground economy to rectify this situation. If you’re struggling financially, and the only thing separating you from financial solvency and a shot at a comfortable retirement is a thousand dollar a month cash-only side hustle, I wouldn’t expect you to show extreme loyalty to the government.
So, yes, Virginia, there is an evil Mr. Groovy. When it comes to the struggling working and middle classes and the underground economy, I’m strictly “don’t ask, don’t tell.” I won’t ask you what you’re doing with the $500 in cash you’re getting every month for renting out a room in your house. And, please, if you’re hiding that money from the government and using it to fully fund your Roth IRA, don’t tell me.
Okay, groovy freedomists, that’s all I got. What say you? Is my tacit approval of “stealing from the government” in certain situations an egregious ethical lapse? Or do you agree with me that the government is so corrupt it doesn’t deserve unwavering respect for its tax laws? And what about your personal life? Have you ever paid a tradesperson in cash? Have you ever accepted cash for a side hustle and failed to declare it on your taxes? I’d love to hear your thoughts on this matter. Peace.