Utah lawmakers raise concerns about construction tax scofflaws

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Employees and government officials are scrambling to enforce rules about payroll taxes that are already on the books, particularly in the construction industry.

Lawmakers are considering ways to enforce tax payroll laws. (Mallory Jesperson)

There are businesses, especially in the construction field, where employers are skirting laws and not paying workers’ taxes into the state’s workers compensation fund.

Greg Letey, general manager of DAW Construction Group, told lawmakers at a May 15 Utah State Capitol hearing that his firm cannot compete with the companies that are not paying these taxes. Sen. Karen Mayne, D-West Valley City, spoke about those following the rules.

“We need to protect our companies,” she said.

What’s important, along with identifying how scofflaw firms are hurting businesses, is following and enforcing the law. Scott Johnson, part of the IRS criminal investigation division, said a lot of general contractors do not have much to verify or any responsibility being enforced upon them. For this reason, there are “a bunch of client companies that are left holding the bag,” he said.

Rep. Susan Duckworth, D-Magna, said she could see the tax fraud issue being a nightmare to track and wondered if there were staffing issues at places like the IRS division. Johnson replied with the figures of 1,700 employees for all 50 states.

Barry C. Conover, executive director of the State Tax Commission, said information needed to catch lawbreakers is scarce. If companies are going to make the choice to be crooked, “they are going to hide as much as they possibly can until someone brings them out of the dark and into the light,” he said.

He used an analogy for a comparison with fuel taxes. He said the further up “the rack” one goes, the more transparency there is. The lower down on the chain, the more fraud or corruption one is going to find.

“It’s not fair to those employers that are paying their payroll taxes” said Rep. Jim Dunnigan, R-Taylorsville. “The law needs to be obeyed.” He agreed with the witnesses.

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