Vice Squad
Monday, January 07, 2008
Taxing Live Erotic Shows [Updated]

Vice Squad was out of town in late December when (links in this post are not safe for work) an Illinois appeals court ruled that Chicago could not exempt small live entertainment venues, except for strip clubs, from a tax on ticket sales. Such a provision discriminates against erotic businesses based on the content of their expression, the court ruled, and that sort of discrimination has to jump through high and multiple hoops to be constitutional. On New Year's day, a $5 per customer tax went into effect for Texas strip clubs. The first constitutional challenge to the tax was brushed aside in mid-December, before the Chicago ruling. The Texas law looks for Constitutional cover from the "secondary effects" doctrine, which did not seem to come into play in the Chicago tax.

Update: This week's Economist also has an article on Texas's "pole tax". The article mentions the recent popularity of earmarking the proceeds for new taxes. (Part of the controversy surrounding the Texas strip club tax is that the proceeds are directed to programs aiding sexual violence victims, despite there being little in the way of hard evidence that strip clubs increase sexual violence.) Beyond the Texas case, all of the earmarked taxes that are mentioned are vice-related: (non-diet) sodas, tobacco, and video games have all recently been singled out for taxes with earmarked revenues -- an approach frequently used for gambling taxes, too. Meanwhile, a Pennsylvania state senator is looking at an earmarked tax on adult businesses (link not safe for work).

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