IRS May Target Pimps

Pimps and sex traffickers could soon find themselves being chased by tax collectors, not just the vice squad.

Sen. 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. A one-year prison sentence and $25,000 fine would become a 10-year sentence and $50,000 fine for each employment form that a pimp or sex trafficker fails to file.

Grassley planned to propose the penalties when his panel meets Wednesday.

"The thugs who run these trafficking rings are exploiting society's poorest girls and women for personal gain," Grassley said. "The IRS goes after drug traffickers. It can go after sex traffickers."

Michael Horowitz, a senior fellow at the Hudson Institute, said the change has the potential to put pimps out of business without difficult trials that require women to testify to abuse and mistreatment.

"We need to simply treat the pimps and massage parlor operators the way we would treat anybody who takes the proceeds of a customer transaction from somebody and then gives a fraction of it back," he said.

Under tax law, that relationship makes the pimp an employer, requiring the filing of a wage statement and the withholding of payroll taxes, including Social Security.

Grassley envisions creating an office inside the Internal Revenue Service to prosecute sex traffickers for violating tax laws. The office would get $2 million to get started, and it would be allowed to keep a portion of the taxes it collects.

The IRS work is intended to build on efforts under way to curb worldwide trafficking. The Justice Department, collaborating with U.S. attorneys offices nationwide, would identify pimps and sex traffickers and refer them to the IRS.

Grassley also wants to change the IRS whistleblower program to allow the girls and women to participate.

If the IRS goes after pimps and sex traffickers for tax offenses now, it conducts lengthy audits of their lifestyles in order to estimate their incomes from illegal activities and determine taxes due.