Texas Strip-Club Tax Called Naked Money Grab
March 26, 2010
Texas levies a $5 tax on patrons of strip clubs like The Lodge in Dallas.
.Texas renewed its bid for a piece of the action at strip joints, arguing Thursday before the state's Supreme Court that a "pole tax" on the clubs' patrons doesn't violate free-speech protections.
Two lower courts have ruled that a 2007 Texas law, which imposed a $5-per-visit fee on people who visit the state's roughly 170 strip clubs, is unconstitutional. A strip club in Amarillo and an industry association filed suit, contending that the state improperly singled out a particular business based on the content of its expression—in this instance, exotic dancing.
In its appeal, Texas said it isn't levying the fee to discourage pole dancing. Instead, the state says, by deterring people from going to clubs, the fee would help reduce rapes that it claimed are linked to drinking alcohol while watching dancers disrobe. The state's lawyers contend that regardless of how the revenue is used, the tax serves a public purpose because it helps to deter undesirable behavior
The law's chief sponsor, Ellen Cohen, a Democrat from Houston who is former director of the Houston Area Women's Center, said in a brief filed with the court that her aim was to combat sexual assault.
But linking "the club industry and some nefarious behavior…is "very offensive to owners of clubs," said Dave Manack, editor of ED Publications of Clearwater, Fla., which publishes the magazine Exotic Dancer.
Lawyers for strip clubs, as well as those advising cash-strapped states and cities interested in imposing "sin taxes" to raise revenue, are watching the Texas case closely. More than a dozen similar bills have been introduced in legislatures around the country in recent years, according to an industry trade group, but none has been enacted.
"I think everyone was watching Texas, saying let's see what happens," said Angelina Spencer, manager of the Association of Club Executives in Washington.
The Utah Supreme Court ruled in November that a 10% gross-receipts tax on strip clubs didn't violate the U.S. Constitution's First Amendment protections for free speech, said attorney W. Andrew McCullough of Midvale, Utah, who represented strip-club owners. Both his clients and the state are likely to ask the U.S. Supreme Court to review the decision, he said.
"Courts have been reluctant to give much protection to erotic dancing," said Jonathan Turley, who teaches constitutional law at George Washington University. But the Texas case, he said, raises the specter of governments using taxes to punish unpopular businesses.
Justices of the Texas Supreme Court, sitting in a courtroom in a law school in San Antonio, spent close to an hour peppering the lawyers for both sides with questions.
For example, the judges asked a club attorney to explain exactly what message stripping conveys.
"Eroticism—seeking to create emotion," replied Craig T. Enoch, who represents the Texas Entertainment Association. He compared that objective to more-mainstream entertainment such as "Angels in America," the Tony-award winning play about AIDS that ran on Broadway in the early 1990s.
The judges also challenged the state's contention that its goal wasn't to raise money or squelch free expression, but rather to deal with what the state described as the "combustible combination" of drinking and nude dancing.
What about the argument, asked Chief Justice Wallace B. Jefferson, that the state was hypocritically "profiting off the very thing it is condemning?"
James C. Ho, the Texas solicitor general, said the state could have criminalized the activities at issue, but legislators chose to impose a fee instead.
So far the levy has raised more than $13.6 million, according to the office of the state comptroller, who is leading the state's appeal. If the state prevails, the money would be used to finance programs to combat sexual assault as well as health care for the poor.
When the legislature passed the bill imposing the fee, it also commissioned a study on the adult-entertainment industry. Researchers at the University of Texas found that the state's "adult cabarets" generate nearly $217 million in economic activity, pay close to $56 million in state and local taxes and employ more than 8,000 people. According to a survey of club owners, there are about 3,181 dancers who on average earn about $57,157 per year; the average patron spends about $45 per visit.