From Michael Alter’s States fiddle while defrauders steal (CNET News.com: 21 June 2005):
More than 9 million American consumers fall victim to identity theft each year. But the most underpublicized identity theft crime is one in which thieves defraud state governments of payroll taxes by filing fraudulent unemployment claims.
It can be a fairly lucrative scheme, too. File a false unemployment claim and you can receive $400 per week for 26 weeks. Do it for 100 Social Security numbers and you’ve made a quick $1.04 million. It’s tough to make crime pay much better than that.
The victims in this crime–the state work force agencies that tirelessly oversee our unemployment insurance programs and the U.S. Department of Labor–are reluctant to discuss this topic for obvious reasons. …
The slow response of state and federal agencies is quickly threatening the integrity of the unemployment insurance system. It turns out that crime is a very efficient market and word spreads quickly. Got a stolen Social Security number? You can more easily turn it into money by defrauding the government than by defrauding the credit card companies.
The net result of this fraud is that unemployment taxes are going up, and that makes it that much harder for small businesses and big businesses to do business. Even more, higher payroll taxes slow down economic growth because they make it more expensive to hire new employees.