Comments: Identity is an asset. Assets mean theft ... and Trade!

It is not only in the US just more exposed. Of course many of the issues have never been revealed here and elsewhere. Identity scenarios differ only mildly in other nations and serve an additional purpose beyond financial transactions. The US system for financial purposes ran along seperate lines than the governmental purpose but they are (like other nations) merging to be more comprehensive and unified.

The new measure that is being launched is that payments made to unauthorized and unqualified entities (as per social security, birth certificate, photo id, and proof of residence) will become a fined event. So all the employers hiring illegal immigrants will now face fines per event.

Banks will recieve a piece for their trouble. The fines will be based on the dollar value of the transaction. So numbers EINs, SS#, Work Visas, and so on will be required for all transactions that require a bank in the US or for any US reporting entity. The IRS along with the banking regulators are crafting this now and will implement it probably in 2007 along with a national id card.

Posted by Jim at June 7, 2005 11:42 AM

It's not the identity, per se. The transaction is driven by two features: the buyer wants the right to work, and the seller wants the short term tax refund, and the long term SS benefits. The buyer is willing to give up certain rights they aren't able to claim anyway. The seller is "investing" in the buyer's labor by providing the necessary "capital". The social utility analysis requires having a clear idea of the contrapostive: if the seller would otherwise work, and the buyer would not be in the labor market, the SSA's balance sheet doesn't change.

Jim O'Donnel observes on IP that 9 million bad SSN transactions is 6% of the employed. Even if everyone has three earning statements, 2% is still one hell of an error rate.

Posted by allan at June 7, 2005 02:02 PM

The SSN is a bundle of assets. Each asset has a unique value. You can trade on these values:
- right to work
- tax refund associated with such work
- ability to obtain credit

So the market for SSNs has matured enough to have derivatives.

" A derivative is a risk-shifting agreement, the value of which is derived from the value of an underlying asset. The underlying asset could be a physical commodity, an interest rate, a company’s stock, a stock index, a currency, or virtually any other tradable instrument upon which two parties can agree."

The owner and the purchaser decrease their specific risks, but the owner of the SSN picks up a new set of risks. What do you think?

wrt identity theft, the IRS it has never and should never be a criminal investigative body. Indeed in TransAmerica Insurance v. Long (1970) Mr. Hanzl robbed a bank, paid his IRS agent with the thousands in cash. The IRS marked his debt as paid, kept the cash, and told the bank, essentially, fooey. Mr. Hazl may be a bank robber, but he paid his taxes.

Posted by Jean Camp at June 8, 2005 03:10 PM

Jean, I would have said that the SSN was a (single) asset that represents a bundle of _rights_. A property, in other words. But this is nitpicking.

The owner of the SSN picks up new risks, but that's the way of things, surely? One thing -- the SSN does not represent a *single* right to work; in fact an SSN can be used many times over. There are some well known issues with a single SSN being used as many as 30 times in the same area. The basic requirement is to have a valid SSN. Beyond that, it seems that there isn't much caring.

Whether and what the IRS should be is obviously a messy issue. My guess is that they want it both ways, so they should be denied both! In terms of their ability to take taxes that are stolen goods, not to have to return them, and not be deemed accessories after the fact, then this puts them above the law. These days, if any other entity in the world were to take stolen monies and declare them as non-returnable, they'd be done for money laundering as well.

(Reputedly, the Dutch have very strong precendences in this issue; criminals are expected to pay their taxes and the info is not available to the police. They also get deductions on their tools of trade .... But the Dutch revenue also play fair, in that if they discover that a person had no right to pay taxes, the taxes collected are all returned.)

Posted by Taxman at June 8, 2005 05:16 PM

Allan, I don't think it is realistic to call it an "error rate". By all reports it is all quite intended, it is better to think in terms of gray markets for labor. If all the informal workers went home that would be more than the unemployment rate, thus putting the lie to that fantasy that immigrants take jobs. If they take them, they'll be taking them home.

Posted by Taxman at June 8, 2005 05:20 PM
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