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Introducing the pimp tax

Scott Tong Jun 28, 2006

TESS VIGELAND: I scream, you scream, we all scream when we pay taxes. But you know who probably doesn’t file a 1040? The folks in the Red Light district. The executives, shall we say, of the world’s oldest profession. Pimps. And today Congress took a step toward cracking down on the sex trade by targeting tax evasion. Al Capone, meet Huggy Bear.

Marketplace’s Scott Tong reports.

SCOTT TONG: Going after sex traffickers in court can be tricky. Prosecutors often have to prove how much sex workers or their pimps make, and let’s just assume no pay stubs. Or they have to get prostitutes to testify against their pimps.

Donna Hughes is with the University of Rhode Island:

DONNA HUGHES: Victims become traumatically bonded to perpetrators. That makes it very difficult to get teenage girls then to testify against traffickers.

Today a Senate panel approved a bill that might make things easier. It gives the IRS more money to go after pimps who don’t file W2s. And it stiffens penalties — 10 years in jail instead of one. At the center of all this is this reality: However you make your money in America, you have to tell the taxman.Len Tracy is a former IRS special agent:

LEN TRACY: If a pimp or a trafficker is making profits off this kind of illegal activity, he must report it on his tax return. Or it would be a criminal offense.

Tracy says the bill gives the good guys a new tool to go after the finances of the underground economy.The former IRS man says it also focuses the agency on the illegal sex trade.

TRACY: For some reason this has perhaps not gotten the attention it should. I think part of that might go to education. Maybe we didn’t know what was going on as much as it is.

Today, though, federal and state politicians are lining up to highlight the issue. And that may have a down side.

LOIS LEE: My friends who I work with call it the crime du jour.

Lois Lee runs Children of the Night, which rescues young prostitutes. She says looking at the sex trade in terms of employers and employees could hurt the wrong person — the prostitute.

LEE: If, in fact, the legislature determines that she is an employee, she too could have tax laws enforced against her and go to prison. So we really need to be thoughtful.

In Washington, I’m Scott Tong for Marketplace.

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