Although the nation's economy continues to shrink, the number of people working in the underground economy is on the rise, according to UW-Madison economics professor emeritus Edgar Feige.
He said this underground economy, which consists of untaxed economic activity, has grown to an estimated 22 to 24 percent of the economy and the amount of unreported income is now over $2 trillion.
According to Feige, whose research is not yet published, the amount of unpaid taxes in the United States has reached nearly $600 billion. In 2001, the IRS estimated the tax gap to be $345 billion.
Although tax evasion has existed ""as long as there have been taxes,"" Feige said it tends to increase during a serious recession, like the current economic crisis.
""It increases the burden on honest taxpayers; it obviously increases the government's deficit. So it also increases the burden on future taxpayers,"" he said.
According to Feige, even a small fraction of the unpaid taxes would significantly reduce governments' deficits. Wisconsin currently faces a 2009-'11 budget deficit of $5.9 billion, and that number is expected to rise.
Jessica Iverson, spokesperson for the Wisconsin Department of Revenue, said it is too soon to determine any state-specific information on the issue.
