Senator Galgiani Announces Legislation to Combat the Underground Economy

April 02, 2018

Senator Galgiani Announces Legislation to Combat the Underground Economy

Sacramento – Today, Senator Cathleen Galgiani announced legislation to combat the state’s pervasive underground economy. SB 1272, sponsored by Attorney General Xavier Becerra, would permanently establish the TRaCE (Tax Recovery and Criminal Enforcement) Task Force within the Department of Justice in California. The TRaCE Task Force is a multi-agency effort that focuses on investigating and prosecuting individuals involved in the underground economy. The bill will expand the current program to all major metropolitan regions of the state including offices in Fresno, San Diego, Sacramento, Los Angeles and the Bay Area. Participating agencies include the Department of Justice, the Department of Tax and Fee Administration, the Franchised Tax Board, and the Employment Development Department. 

"It is estimated that the state loses $8.5 billion in corporate, personal and sales and use taxes each year as the result of the underground economy. Needless to say, these are significant uncollected taxes that are desperately needed to fund basic government services -- an amount relatively equivalent to the state’s rainy day fund. Not only does the Task Force go after uncollected taxes, they also investigate labor law violations, and protect law abiding business owners who are put at a competitive disadvantage. The TRaCE Task Force has been operating as a pilot program and has already recovered millions of dollars in lost tax revenue for the state" said Senator Galgiani. 

Since its inception, TRaCE teams have identified $210 million in unreported gross receipts and $46 million in associated tax loss to the state. The legislation will provide significant support to the Task Force in order to continue going after wage theft, labor law violations, intellectual property violations as well as protect consumers and law abiding business owners.

“Here in California, home to the world’s sixth-largest economy, every worker who powers this economic engine deserves rights at work, every upstanding business owner deserves a fair market, and every taxpayer deserves to see their hard-earned money used to fund vital services,” said Attorney General Becerra. “If you work hard and play by the rules, you should be able to get ahead. This legislation would provide the resources needed to enforce the law and protect the pocketbook of every hard working Californian.”

The legislation is also supported by various business and labor groups and will be heard in its first policy committee, Governance and Finance on April 4th.