What is the true cost of the shadow economy in the U.S.?

What is the true cost of the SHADOW ECONOMY in the U.S.? With talks of budget cuts and the deficit around every corner it might come as a surprise to know that one part of the economy is doing exceptionally well - The Shadow Economy. WHAT IS THE SHADOW ECONOMY? The shadow economy is also referred to as the "informal economy" and it includes, but is not limited to, the black market. The shadow economy describes all activity that is not declared for tax purposes and is usually carried out in exchange for cash. That includes everything from your "cash or check" plumber all the way down to the oldest profession in the world (prostitutes). THE SHEER SIZE Economists estimate the size of the underground economy at somewhere between 8 percent and 14 percent of total GDP, which could amount to as much as $2 trillion worth of economic activity. Let's see what it means in terms of GDP. $14.991 trillion US GDP $2.098 trillion Shadow Economy So without the existence of the shadow economy, the total GDP would be: Over $17 trillion Total GDP US FEDERAL BUDGET DEFICIT $2.449 trillion 2012 Federal Revenue $2.791 trillion With Shadow Economy $3.538 trillion 2012 Federal Expenditures This is still not enough to cover the US federal budget deficit. This helps to shed some light on how big this deficit is. HOW DOES IT COMPARE? The following chart represents the size of the Shadow Economy relative to the total GDP in different countries. U.K. SPAIN 12,5% 22,5% ITALY BRAZIL 27% 39% RUSSIA CHINA 44% 12,7% U.S. FRANCE 9,1% 15% INTERESTING FACT Did you know, that shadow economy is measured by the total electricity consumption? GDP correlates with an increase in electricity consumption because production in both the formal and informal economy requires electricity. This infographic was researched and produced by Wallace & Associates APC, a Los Anç Encino based certified public accountant (CPA) boutique agency offering individual and corporate income tax preparation, foreign bank account reporting (FBAR), international taxation, and a wide range of accounting services. Source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id%3D2208637 Visit www.wallaceapc.com for more information.