Bling Bling Puts Heat on Rappers' Income
1:00PM ET August 4th, 2010
Contributor : Todd Williams
A Rocky Williform Company
Back in 2009, Forbes--perhaps the most reputable financial publication in the country, released it’s first ever list of the wealthiest African Americans. Forbes, which has what amounts to unfettered access to documentation regarding entertainers’ estimated worth, only included one rapper on the list: Shawn “Jay-Z” Carter, who ranked #14 with an estimated net worth of $150 million. Rappers make headlines constantly in regards to their wealth and how they spend it, and are usually pretty vocal about their prosperity; yet only one is wealthy enough to make the Forbes list? In his controversial "Nightline" interview, it was insinuated that Sean “Diddy” Combs is worth an estimated $345 million; yet Combs is not on the Forbes list. Those kinds of discrepancies raise red flags with the Internal Revenue Service, and, according to HipHopBlog.com's confidential source within the U.S. Department of Treasury, the Forbes list played a major role in the Department recently mobilizing a special IRS unit into an ongoing task force designed to monitor entertainers' assets.
This “issue management team” was formed in 2007 with the goal of scrutinizing unclaimed tax money from athletes and entertainers in the United States and HipHopBlog.com's confidential source confirmed that the unit has informally been around for years, but is now a focused, specialized task force. “Information and intelligence is being collected on an ongoing basis; from listening to lyrics and interviews to reviewing magazine and newspaper clippings in an effort to identify financial discrepancies,” says the department official. “Its what is referred to as a 'paper trace'—and rather than target a certain person; it was created specifically to hone in on cash transactions within the industry.” And the results have been obvious. Earlier this year, it was revealed that former Death Row Records head Suge Knight owes more than $6 million in back taxes and rapper Lil Wayne reportedly owes the IRS $1.1 million. Rappers like Eve, Fat Joe and Method Man have faced charges for back taxes owed. Film star Wesley Snipes recently lost his appeal of a federal tax evasion conviction, and earlier this month, it was reported that actor Chris Tucker owes the federal government $11 million. Just this week, the home of rapper Young Buck was raided by federal agents due to unpaid taxes. The apparent disparity in Diddy's net worth as alleged on a national news program, Brian "Birdman" Williams' alleged oil well in Oklahoma--these are the types of under-reported assets and discrepancies that only bring scrutiny from the I.R.S.--and the I.R.S. is most definitely watching. In 2009, Birdman famously bragged to several publications/websites that he and Wayne earned more money than Jay-Z. If that is the case, is it being reported?
“There’s a much deeper issue here and an extraordinarily poignant message,” explains Rocky Williform, publisher of HipHopBlog.com. “It’s not like athletes—who have a tremendous amount of income that normally is pretty justifiable. Entertainers earn money through a variety of sources. For instance, rappers make appearances at popular nightspots and there’s a chance of them being paid cash." Athletes generate significantly more money than the average hip hop star; both Tiger Woods ($600 million) and Kobe Bryant ($140 million) are active sportsmen who made the Forbes list, but that income is generally attributed to lucrative contracts with their teams and endorsement deals. But recording artists facing ongoing tax issues are evidence that hip-hop’s penchant for flash is drawing the kind of attention to rappers and their affiliates that they could do without. The status quo for hip hop artists has been to create a spectacle to be noticed. However, that spectacle is being noticed by just about everyone--including the IRS. "This is reminiscent of number of years ago when former Washington D.C. party promoter Marc Barnes, during an interview with the Washington Post, spoke about the revenue he was generating," Williform shares. "Which resulted in IRS scrutiny."
One resolution is for young, black entrepreneurs to understand the characteristics of being wealthy vs. the pitfalls of being rich. Hip Hop has a unique opportunity to transition from the mentality and lifestyle of rich to an approach and mindset of wealthy. Former NBA stars Michael Jordan and Magic Johnson were at numbers four and five on the Forbes list; their estimated worth listed at $525 and $500 million, respectively; and both former athletes' current wealth is derived from business deals and/or endorsement contracts. Russell Simmons is a hip hop impresario who has been able to diversify and maintain his wealth for decades. Neither Simmons, Johnson or Jordan have ever subscribed to gaudy public displays. Their success offers a template for how young and talented entertainers can maximize their riches and create opportunities for others while establishing wealth that can be sustained and transferred to future generations. “It’s about building wealth rather than being rich," Williform explains. "Rich people utilize a skill to make money, whereas wealthy people utilize their knowledge. Hence the old cliche 'a wealth of knowledge.'”
When wealthy individuals lose money, they typically recover it because they have the business savvy to do so; while rich people only have the skills that made them rich. As those skills diminish or become obsolete, those people find it all but impossible to continue to make money at the same level. Wealthy people have the know how, and this is why most never go broke. The Forbes list is a good indicator of who has actually made that transition from rich to wealthy, but it is also serving as a barometer for what rappers' claim their worth is as opposed to what's officially documented. African Americans can and should borrow a page from the Jews playbook--a playbook that most African Americans have only been mere characters in thus far. Going forward, there will likely be more entertainers facing more tax issues, but the generation of conspicuous consumption and culture of 'bling-bling' gaudiness will have to be re-examined and possibly discarded, as rappers will soon be forced to pay dearly for their addiction to glitz.