[Fjolsvith]

20% to 30% of an employee's income is straight up income tax paid out of the employee's income. If the employee is under the table, the employee's income is lumped in the employer's for taxable purposes. Social Security and Medicare taxes are maybe 1-2%. Look on any pay stub.

[shadowgovt]

The employer still keeps more money, even if they're paying more in taxes. The employer may end up paying 20% of their income out in taxes, but they keep the other 80%; they're still out 100% of the money they pay to the employee, and if the under-the-table employee costs less than the over-the-table employee, they keep more money at the end of the day. Who cares if you're paying more tax if you have more cash?

And that's before we factor in that the over-the-table employee also costs SS, Medicare, unemployment insurance, overhead costs to administer all this because they clearly don't only have one employee, the list goes on.