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As with any tax system, compliance is always an issue for the revenue department. Compliance is made even more difficult when individuals are engaging in illegal activities.
Because our federal tax system is based primarily on taxing income, the tax enforcers can become involved in the hunt for the initial illegal activity that earned the income.
And that is how one U. Senator wants to now round up all the pimps. From the Atlanta Journal-Constitution:. Pimps and sex traffickers could soon find themselves being chased by tax collectors, not just the vice squad. Charles Grassley, chairman of the tax-writing Senate Finance Committee, wants the Internal Revenue Service to chase after pimps and sex traffickers with the same fervor it stalked gangster Al Capone for tax evasion.
Grassley R-Iowa would hit pimps with fines and lengthy prison sentences for failing to file employment forms and withhold taxes for the women and girls under their command. The proposal would make certain tax crimes a felony when the money comes from a criminal activity. Grassley planned to propose the penalties when his panel meets today. Grassley appears mainly interested in preventing the illegal activity from occurring in the first place and using the tax code as an avenue for that prosecution rather than obtaining the revenue that escapes the treasury as a result of the unreported source of income.
Along the same lines, some of those involved in black market activity actually welcome taxation if the government was to permit the activity. This is because they believe it would create a revenue windfall for politicians that are always hungry for more money to spend. The theory is that once the activity was legalized, the politicians would become addicted to the revenue source, and the costs of ever going back to prohibition would be too great.