Uncle Sam's Curse: Rappers & Tax Trouble

posted Friday September 13 ,2013 at 09:49AM CDT | 21 comments

Uncle Sam's Curse: Rappers & Tax Trouble

As Lauryn Hill and Fat Joe's recent woes highlight, the infamous tax evasion charge is probably one of 2013's most disturbing Hip Hop trends.

“Alphabet boys they’ll get ya ass / IRS they was on a nigga / Cashed them out, now I’m scott free / Got my passport in my Jansport / Now I’m overseas…” –Jay Rock, “U.O.E.N.O. (Remix).”

Suppose you were told about a group whose members had a combined net worth of hundreds of millions—possibly billions—of dollars at various points in their careers. The members weren’t elected officials or part of some secret society like the so-called Illuminati. Would you want to join? As it turns out, it’s probably a group the average citizen wants no part of. Fat Joe and Lauryn Hill highlight the latest Hip Hop figures to face tax trouble. Both artists were fixtures during the ‘90s and early-to-mid aughts, and now they both currently find themselves serving prison sentences for tax evasion charges. But Hill and Fat Joe aren’t alone. They’re just the latest in a long list of Hip Hop and R&B artists that have faced tax troubles. The argument stands that you could make one hell of a mixtape based on all the artists who have been cracked for taxes over the last few years. Type in, “Tax” or “IRS” in HipHopDX’s search box, and you’ll find Method Man, Lil Wayne, Bow Wow, Beanie Sigel, R. Kelly, Nas, Sean Garrett, Young Buck, Dame Dash and Swizz Beatz, among others.

As Hill and Fat Joe’s recent woes highlight, the infamous tax evasion charge is probably one of 2013’s most disturbing Hip Hop trends. But why does it keep happening? Are rappers any more or less prone to be abreast of ever-changing (and maddeningly frustrating) tax legislation? Is Hip Hop being targeted? Or are we just looking at another sad Hip Hop stereotype? After all, at least six of the artists mentioned above could previously be found flaunting their wealth on episodes of “MTV Cribs.”

As expected, the average rapper facing a massive tax lien isn’t going to be too forthright. But HipHopDX was fortunate enough to round up some artists that have been on both sides of those hefty payments to the United States Treasury. I don’t think anyone is going to unearth a cause for Hip Hop’s tax problem that doesn’t fall under the umbrella of the usual reasons any entertainer finds themselves in the red—pure negligence, lack of information and/or a philosophical opposition to paying taxes.

Can It Be All So Simple: A Lack Of Financial Information

“You know what’s fucked up about taxes? You don’t even pay taxes; they take tax. You get your check...money gone. That ain’t a payment, that’s a jack.”–Chris Rock, “Bigger & Blacker”

I’m of the opinion that there is nothing intuitive about being self-employed. For us dumb Americans, the government takes the liberty of automatically deducting up to 12.4% of our annual income for Social Security plus another 2.9% for Medicare. And if you’re a salaried or hourly wage employee, your employer foots half the bill for the above amounts. Depending on the state (and sometimes the city) in which you claim residence, things can get considerably more difficult if you’re self-employed. So if you’re wondering why your favorite emcee is showing up on the IRS’s shit list, that’s a good place to start.

“People are going to jail now; they said Lauryn Hill is going to jail,” noted Tech N9ne. The Kansas City-based emcee is known for his business acumen, having sold over one million albums through his independent imprint Strange Music. “I just paid the IRS a Maybach in three months…400,000. I paid, and I’m still paying, but I’m not in any danger of going to jail. That’s why it’s important.”
 
As Tech’s comments illustrate, all that “be your own boss” talk sounds great on paper until you’re sitting across from a CPA and being informed that you owe the IRS millions of dollars. Ooops. I think the same lack of financial information that leads to rappers signing 360-deals or borderline predatory contracts with laughable royalty rates plays into them not knowing how to maneuver in what is essentially a cash in hand business. Nick “Lush One” Carletti Hyams can testify to the volatile nature of Hip Hop business. He is the current King Of The Dot “Fresh Coast” General Manager and former Grind Time Now CEO. Lush has seen the five-figure checks paid out to battle rappers and the fallout when six-figure YouTube and Pay-Per-View revenues aren’t split in an agreeable fashion.

“A lot of rappers didn’t even have business sense period until the late ‘90s—until you saw Master P, Puffy and the other independent entrepreneurs that were taking the movement mainstream,” says Lush One. “Before that, it was all about artists getting exploited. Shout out to Jive/Zomba in the ‘90s destroying the Bay Area. Loud Records, Rawkus and those type of deals were pretty much par for the course. It goes back way beyond Hip Hop. You can look at Motown, Sun Records…it’s the nature of the record business. Let’s not even get into Reggae. You can watch The Harder They Come if you wanna see dudes getting done real filthy.”

There are no hard statistics or even a straw poll to answer this question, but given what most of us know about the average rapper on just an anecdotal level, how many of them do you think had experience with long-term employment and filing taxes? When an artist posts a picture signing their new contract (and/or receiving the requisite diamond-encrusted chain bearing the label’s logo), what we often don’t see is the 150-page contract they finished signing. Maybe those just don’t look as good on Instagram. Either way you slice it, for all that “on my grind” and “all about my paper” talk, most aspiring Hip Hop artists are poorly equipped to start conducting themselves like a one-person business.

Combine a lack of financial knowledge with the complex and predatory nature of the recording industry, add in a little negligence, and you have the perfect recipe for a tax evasion charge. As a viewer, these factors make it at least somewhat easier for me to understand how someone like Beanie Sigel or Young Buck can end up behind bars for a series of financial mishaps. And while the New York Post is more than happy to run an inflammatory headline like, “Method Man Was Too High To Pay Back Taxes,” all of the above facts shouldn’t fool any of us into adopting a paternalistic, “Damn, those poor rappers don’t know shit-about-money” attitude. Meth’s ill-timed weed joke aside, negligence is negligence.

Can’t Knock The Hustle: The Downside Of Self-Employment

“IRS all in my books getting they Matlock on / All this capital, It’s like I left the caps lock on / It’s like every time I plot a return I seem to shift the game / See I can still talk keys without pitchin’ cane / Pay yourself and owe yourself...”–Drake “Jodeci Freestyle.”

Without getting into a bunch of boring legal talk about the finer points of the Federal Insurance Contributions Act or what it means to get acquainted with a Schedule 1099 tax form, there are really only three commonly known reasons why a Hip Hop artist would neglect paying their taxes. As an increasingly reluctant fan, I completely expect the first two reasons—an overall lack of financial knowledge (particularly as it pertains to the US tax code) and being lazy and/or negligent. For the most part, I can even empathize. There’s not exactly a structured financial seminar for writing about Hip Hop, so I’ve endured my fair share of sitting across from an accountant and asking, “I owe what?” It was a moment that found any and all professional decorum escaping me, as I shot back, “That’s some bullshit!” And we all have at least one friend or family member who is hurriedly either mailing in their taxes or filing for an extension on April 14 of each year.

Setting aside my own four-figure lesson in the pitfalls of not fully understanding the ins and outs of being self-employed or an independently contracted consultant, even fellow rappers have little sympathy for their peers on the losing end of a battle with the IRS.

“A lot of rappers just start to get money when they start rapping, so they don’t really know what to do with no money,” says Mitchy Slick. “But before I was paying taxes for Rap, I was paying taxes for getting money doing regular stuff already. I was owning homes and all that before I ever had a chance to pay some taxes on some Rap shit or something like that. Really, what you gotta do is get you one man—somebody that’s reputable—and you just put it in his hands and pay him. It’s gone cost you a little more, but you just pay the guy to stay on top of your taxes.”

Simply put, hire a money person (the cost of which is also at least partially tax deductible) and let them worry about it. Of course, if it were that simple we probably wouldn’t hear about so many different rappers and their tax troubles, right?

Playing The Race Card: Institutional Racism

“Here is a land that never gave a damn / About a brother like me and myself / Because they never did / I wasn’t with it, but just that very minute it / Occurred to me / The suckers had authority / Cold sweating as I dwell in my cell / How long has it been / They got me sitting in the state pen...”–Chuck D, “Black Steel In The Hour Of Chaos.”

Usually, citing negligence or a lack of information as the reasons why Hip Hop artists find themselves behind the financial 8-ball more or less ends the discussion. But when Hill penned an open letter via her Tumblr account in July, she introduced institutional racism into the argument. During the course of a roughly 1,500-word discourse, Hill questioned the IRS—and by extension the entire US Government’s role—and their ability to tax her or any other person from a marginalized societal group. For the most part, I found it a sound yet futile argument. As it directly concerns Hill’s ability to pay taxes and any rationale for not being able to do so, I can’t speak to that. But she did address two points that were apparently brought up at her sentencing with the following passage:

“The prosecutor, who was a woman, made a statement during sentencing about me not doing any charity work for a number of years during my ‘exile.’ A) Charity work is not a requirement, but something done because someone wants to. I was clearly doing charitable works way before other people were even thinking about it. And B) Even the judge had to comment that she, meaning I, was both having and raising children during this period. As if that was not challenging enough to do. She sounded like the echo of the grotesque slave master, who expected women to give birth while in the field, scoop the baby up, and then continue to work. Disgusting.”

Again, the amount of financial burden Hill may or may not have encountered while raising children and removing herself from the major label recording and touring system is subjective. I’m not going to sit here and psychoanalyze her. I only bring up her Tumblr response, because—much like Lush One’s quotes—it speaks to a systematic cultural experience much larger than Hip Hop. Hill is protesting paying her taxes on moral grounds and essentially making the same argument as American Colonists in the 1700’s.

Uncle Sam Goddamn: A Case For Marginalized Taxpayers

“The record skips, ‘cause my voice is kinda scratchy / From yelling, don’t shoot when 5-0 comes to harass me / They never pass me, no one to go and tail bro / Trying to kill the movement with the new COINTELPRO / Leaders they killed, if I said it, it would threaten ‘em / They only see my back because I’m three steps ahead of ‘em...”–E-Roc & Boots Riley, “Dig It.”

Interestingly enough, when I read Hill’s Tumblr post, I didn’t think of another Hip Hop artist, but I thought of Wesley Snipes…and to a lesser extent Marcus Garvey. Before you decide to automatically tune out or set DX’s comment section ablaze, I’m not comparing Lauryn Hill to Marcus Garvey in any way, shape or form. However, most would agree that Garvey’s 1922 conviction for mail fraud (after being indicted on charges of criminal libel) was more a byproduct of J. Edgar Hoover and the US Government literally looking for grounds on which to have him deported for his Pan-Africanist rhetoric. It didn’t help that Garvey’s operation was financially mismanaged and almost perpetually under-funded. And the charges of mail fraud stemming from selling stock in a ship which he didn’t own at the time came down to one transaction amid the thousands he conducted on behalf of the Black Star Line. So no, Hill is no Garvey. But I think she’s at least indirectly arguing that there is a precedent for marginalized people facing legal action based upon institutionalized racism and a lack of financial knowledge labeled as a willful disregard for the system. Given that Snipes was released from prison in April of 2013 after serving a three-year term for tax charges, I think he’s a logical starting point. While his pre-sentencing rationale lacks some of the militant brimstone of Hill’s, they do make similar arguments. In the April 2010 issue of GQ magazine, Snipes said the following:

“My cultural experience is such that I know we’ve been deceived. We've seen examples of lies and information purposely withheld or distorted or misrepresented…I know that there are people out there that have information and benefit from things that the majority of people in this country do not know or do not get the benefit of. In a very general sense, there is information that people are not privy to…I don’t see it so much as conspiratorial as more a comment on how uneducated and maybe illiterate we are.”

There’s a lot packed into that quote. Like Hill, Snipes mentions a cultural experience that includes intentional deception and a withholding of information. When reading their comments, I infer Snipes has been taken advantage of by at least one traditional accountant. His turning to Eddie Kahn of American Rights Litigators/Guiding Light of God Ministries reminds me of people who go visit a shaman or priest when traditional Western medicine fails to cure an illness. And since Kahn is serving 10 years on tax-related charges, he very much reminds me of the Brother Anthony lunatic that once advised Hill. At any rate, to me, Hills comments sound like those of a woman that doesn’t want to pay taxes to a government that has intentionally harmed marginalized people and lied about such acts. I’m specifically referring to acts such as Hoover’s COINTELPRO, The Tuskegee Experiment, The Iran-Contra Affair or the systematic genocide of the Native American population just to name a few. Much like Hill and Snipes’ response, this is not a particularly linear argument. It’s not as if IRS agents were the ones perpetuating these atrocities. If I’m loosely following Hill and Snipes though, the IRS is a branch of the same government that condoned, at times covered up, and in most cases, has yet to atone for such acts. I think this is an issue bigger than Hip Hop and bigger than race for that matter. I’m also not arguing that Hill or any other Hip Hop artist that represents some marginalized group within society should be exempt from taxes. But I do think Hill’s position adds another layer to the story. For all we know, other emcees feel similarly about paying taxes and just weren’t able to articulate them in a similar fashion. Paris, Public Enemy, Brother Ali and Witchdoctor have essentially made similar arguments. They just continue to pay their federal and state taxes while doing so.

Everything Is Fair: Financial Dependence & Few Options

“Said I’d be all up in Goldman Sachs / Like these niggas tryin’ to hold me back / These niggas tryin’ hold me back / I’m just tryin’ to protect my stacks / Mitt Romney, don’t pay no tax / Mitt Romney, don’t pay no tax...”–Kanye West, “To The World.”

Given that being a musician is a cash in hand profession, should labels give artists some optional training to prepare for protecting their non-traditional source of income? According to a 2011 informal poll among record executives, the New York Times puts the average artist’s royalty rate at 15%. That essentially means the net profits from 5 million sales can net a return as low as $45,000. Back in 1998, Hill herself rhymed, “It ain’t what you cop, it’s about what you keep.” If artists knew up front they were only keeping, on average, about 15% of the income they generate, does it become more advantageous for record labels to keep their artists financially dependent? Maybe we’ll never get the answer to those questions. And my little game of Devil’s Advocate aside, I never heard Hill raise these claims of institutional, systematic racism when she was reportedly raking in millions from her catalogue as a soloist and as member of The Fugees. Ultimately, maybe it doesn’t matter. If you bring in a certain amount of revenue as a citizen or resident of the United States, your options are basically to pay taxes or get very used to the idea of chilling in a five-foot by nine-foot prison cell. And that applies to rappers, activists, actors and pretty much anyone else. Is it fair that two of arguably the most influential Hip Hop artists of the ‘90s are behind bars despite that even the United States’ own Treasury Secretary, Timothy Geithner, failed to pay roughly $34,000 in taxes while working at the International Monetary Fund? What about Mitt Romney’s reluctance to disclose his tax returns in the months leading to the 2012 Presidential Election? Probably not, but who said life was supposed to be fair? The only thing promised is death. And taxes.

Omar Burgess is a Long Beach, California native who has contributed to various magazines, newspapers and has been an editor at HipHopDX since 2008. Follow him on Twitter @OmarBurgess.

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