Daaaaaaaaaaarryl: Your Taxes Are Due

 
 
August 16, 2007

Trouble seems to follow former Major League Baseball star Darryl Strawberry. As is frequently the case, once the regular law enforcement (for drug charges, etc.) is done with you, the IRS will come calling. Sometimes the two are directly connected (income earned from illegal activities), while in other cases, it's merely the fact that those who are likely to engage in one type of illegal behavior are more likely than others to also not bother paying Uncle Sam. From the Daily South Town:

The government has filed a lawsuit against former slugger Darryl Strawberry, seeking to collect nearly a half-million dollars in unpaid taxes.

The complaint filed Friday in West Palm Beach, Fla., was years in the making. Strawberry was indicted in 1994 on federal tax evasion charges and pleaded guilty the following year.

He was sentenced to six months home confinement and ordered to repay $350,000 in taxes.

In all, with penalties and interest, the government said Strawberry owes $481,656.86 as of May 31.

A Justice Department spokesman said he could not comment on why the lawsuit was being filed so long after Strawberry's indictment or whether the former baseball player had previously paid any of the back taxes he owed.

No attorney was listed for Strawberry in court filings and calls to several lawyers who previously represented him were not returned.

The IRS and federal prosecutors investigated Strawberry in 1994 for failing to report hundreds of thousands of dollars in income from autographs and memorabilia. He was indicted along with his agent Eric Goldschmidt later that year.

Yes, Mr. Strawberry, when you charge people for autographs, that is income according to the IRS. Some backers of national retail sales taxes such as the FairTax may believe that a sales tax would prevent the type of tax evasion Mr. Strawberry has been accused of, and they sometimes claim the FairTax would "make criminals pay." But it's not that simple.

For example, suppose you have a drug dealer who makes $50,000 in untaxed income. It is true that switching to the FairTax would make the drug dealer pay some tax when he buys other products, but the drug buyers would still avoid paying tax on drug purchases because black market sales would remain untaxed. But the income the buyers use to buy the drugs would not be taxed as it is currently. The amount of untaxed money involved in criminal transactions would be similar to the amount that is involved now. The incidence of the tax may change, however, within that black market. (Technically, if the drug buyers are non-payers as well, the FairTax could add to taxing some of the underground economy.)

(In other words, if it's wrong for the drug dealer to be able to maximize his utility via tax-free income when he buys regular products, how is this any different from a drug buyer being able to maximize his utility by earning tax-free income under the FairTax with which he will buy the drugs?)

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