Taxes

Do Texas Authorities Want to Discourage Pole Dancing or Profit From It?

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Texas strip club owners have stopped paying the pole tax in the midst of a legal dispute, according to The New York Times:

When Texas lawmakers passed a $5-per-patron strip club fee in 2007, they pledged it would raise $40 million in the first year to finance programs to combat sexual assault and low-income health insurance.

In Texas, this is what counts as "family entertainment."

Four years and one seemingly endless lawsuit later, the state has only raised a fraction of that figure — $14.5 million. None of the money has been spent as the state awaits a ruling on the law's constitutionality from the Texas Supreme Court. And just 111 of the state's 176 strip clubs have paid any money, according to an analysis of the state comptroller's records.

Confident that the law will be overturned, many club owners, like Dawn Rizos, who runs The Lodge strip club in Dallas, have stopped paying.

At The Lodge — with its six stages where women swing masterfully around poles — Ms. Rizos said she paid more than $600,000 to the state in the law's first year. It was such a detriment to her bottom line, she said, that she stopped. With a court case pending, "I felt stupid trying to do the right thing," she said.

The fee has hardly left the headlines since lawmakers first passed it and the strip club owners promptly filed suit. Lawmakers revisited it this legislative session, trying unsuccessfully to change it in a way some felt might protect it from the continuing legal challenge. For now, the money that has been collected is sitting in the bank.

Whip it good.

Lower courts have already ruled the state's fees as an unconstitutional violation of free expression, so strip club owners aren't being entirely unreasonable in thinking that the fees won't ever be need to be paid.

At a hearing last year on the tax's legality, a judge asked the the strip club attorney whether it's "proper or not for the state to have the position that live nude dancing should be discouraged?" What might conceivably justify it as "proper?" Proponents of strip club fees have argued that the "secondary effects" of strip clubs, such as increased crime, domestic abuse, and rape, justify state discouragement of the establishments. What they rarely note is that there's not much good evidence to support this argument. As Elizabeth Nolan Brown reported for Doublethink in 2008, the studies cited to prove the existence of such negative side effects fail to factor in the locations of the clubs:

Many studies that have "proved" the existence of secondary effects have (innocently, no doubt) conflated correlation and causation, noting that areas heavy with strip clubs – which are often located in poorer or seedier parts of town – were also heavy on violence and crime.

In the only published, peer-reviewed study of secondary effects, the authors found no more incidents of crime in areas surrounding strip clubs than in control areas without adult businesses. And a 2004 review of secondary effects literature led by University of Central Florida psychology professor Randy D. Fisher found "adult businesses such as nude and semi-nude entertainment facilities have not been identified as crime hotspots" but rather that "research … would suggest that alcohol serving establishments, hotels and restaurants associated with nightlife activities would most likely be crime hotspots."

Moreover, it's hard to believe that the state is attempting to "discourage" strip clubs, not when it's attempting to use the new revenue the strip club fee provides to fund expanded public services. According to The Huffington Post, when the pole tax was passed in 2007, it was "projected to raise about $44 million over the first two years for sexual assault prevention programs and health care for the uninsured." So far, thanks in part to non-payment resulting from the legal dispute, it's raised just $13 million—and because of the legal dispute, none of that money is accessible to state authorities. The ongoing court battle is in part an effort by the state to get access to that money.

The revenue involved undercuts the "moral" case for the fees. At last year's hearing, the same judge also asked whether it is "unconstitutional for the state to target live nude dancing because it believes it's culturally unsound, immoral?" If state authorities truly believed that such dancing was "culturally unsound" and "immoral," then why did they set up a system that relies on the continued popularity and success of the state's many strip clubs in order to fund public services?

This isn't the only time states have tried to profit off of industries they supposedly want to discourage. Last week, I noted the problems Arizona has had funding public health coverage through tobacco industry revenues.

[Via commenter Au H20.]