Unzipped by the underground economy | Andy Hobbs

(Warning: This column contains language and content intended for mature audiences. Please stop reading if you are offended by prostitution and the seedy side of Federal Way. Side effects from reading this column may include increased libido or an overwhelming urge to undermine authority.)

For $200 per hour per person, or $250 if paying by credit card, you can choose from a variety of ladies who come to you.

That’s what the man on the phone said about his escort service. A simple Google search leads to the Federal Way listing, although the service is not actually based in city limits. The man on the phone dispatches calls “like a cab company” to serve King and Pierce counties. The more I asked about the service, the more I annoyed him. Follow-up calls were unanswered, and likely for good reason: He said the private company keeps a discreet profile “in order to not cause waves.”

I declined to probe further into how he avoided “causing waves” with the law. Based on past reports of massage parlors and political scandals involving prostitution, one conclusion was obvious: Uncle Sam misses a lot of cash exchanged behind the green door.

To complete the recipe for a hearty black market, add plenty of illegal immigrants as well as the cornerstones of humanity’s dark side: Pornography and drugs. Then remember that when the mainstream economy is limping, the underground economy is growing.

In this definition, “underground” refers to money that escapes the government’s tax radar. The underground economy thrives on a cash-based business model, covering both commodities and labor.

With unemployment hovering over 9 percent in Washington state, each wave of job losses creates more potential for the underground. Unlicensed businesses, for example, cost the state about $457 million a year in lost taxes, according to the Department of Revenue.

The underground cash flow may add up to as much as 10 percent of the U.S. economy, according to a March 2009 Wall Street Journal article “The rise of the underground.”

A range of reports estimate the underground economy’s size at $1 trillion or higher. In addition, a massive amount of U.S. currency circulates overseas.

Underground activity is typically done in secret, making it difficult to gauge the size and impact of certain trades. Marijuana, perhaps the Cadillac of illegal cash crops, generates billions of tax-free dollars in sales. In California alone, that means $14 billion under the table, according to Time magazine.

It is impossible to encapsulate the underground economy’s effect on society in just one column. Supply and demand fuel both economies, and the concept applies worldwide. The more obstacles present in the mainstream, the more people seek financial incentives from the underground — defying the law with each satisfied customer.

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