Taxing Nudity: Discriminatory Taxes, Secondary Effects, and Tiers of Scrutiny—part 1 in a series

Serial-blogging my recent article in the Journal of Free Speech Law

My new article, Taxing Nudity: Discriminatory Taxes, Secondary Effects, and Tiers of Scrutiny, has been published in the Journal of Free Speech Law. It's based on my work with the Georgia Association of Club Executives v. Riley case, where we challenged a Georgia tax on adult entertainment establishments on First Amendment/free speech grounds. I'm pleased to have been brought into the legal team by Gary Freed and the folks at Freed Grant LLC; I argued the case in the Georgia Supreme Court in 2021, and after the Court remanded on procedural grounds, I argued the case in the Georgia trial court in 2022. (More appeals probably to come.)

I'm going to serial-blog the article over the next few days; today I'll give you the abstract and introduction. (The article obviously has a lot of footnotes—go to the article itself if you want to see those.)

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Abstract

In recent years, states have passed "pole taxes," i.e., taxes targeting nude dancing at adult entertainment establishments. Such taxes generally target establishments where alcohol is consumed, and the proceeds generally fund programs that benefit victims of sex crimes (or similar). Some of these taxes are "erotic-expression taxes" that specifically target sexual dance or other expressive conduct, while others are more general "nudity taxes" that are not defined by reference to expressive conduct.

State governments have defended such taxes against First Amendment attack on the theory that (1) such taxes combat negative secondary effects and (under City of Renton v. Playtime Theatres, Inc.) should be analyzed under intermediate scrutiny as though they were content-neutral, and (2) such taxes survive intermediate scrutiny, given sufficient evidence of the link between the establishments and the secondary effects.

I make two independent claims here. First, erotic-expression taxes are subject to strict scrutiny because they are content-discriminatory. The Renton framework has never been applied to taxes (as opposed to regulations). Nor should it be extended to taxes: on the contrary, a strict-scrutiny approach is more consistent with modern First Amendment caselaw.

Second, for both erotic-expression taxes and nudity taxes, even if courts apply intermediate scrutiny, these targeted taxes are constitutionally vulnerable. A number of possible governmental interests are impermissible because they are themselves speech-suppressive or discriminatory; some other interests are potentially valid, but the targeted taxes do not further those interests more than general taxes. The interest in fighting a secondary effect can be valid, but only under stringent conditions that are often not met in practice.

Introduction

Two lines of First Amendment precedent are on a collision course.

First, the Supreme Court has long held that government can't discriminate against particular expression because of its content. For instance, a city ordinance can't prohibit picketing near a school but make an exception for labor-related picketing. Not that such "content-discriminatory" (or, equivalently, "content-based") laws are necessarily invalid; but they are subject to the familiar "strict scrutiny" standard—i.e., they must be supported by a compelling governmental interest and must be "narrowly tailored," meaning that the government's chosen means to pursue its interest must be the least restrictive (or least content-discriminatory) alternative. As we all know, not many laws can survive that standard.

And how do we determine whether a law is content-discriminatory? We look to whether content discrimination is present on the face of the statute. But what if a statute is content-discriminatory on its face, but motivated by a content-neutral purpose, like promoting traffic safety or avoiding school disruption or encouraging fledgling publishers? Irrelevant: content-neutral purposes can't save a statute that's content-discriminatory on its face from having to face strict scrutiny. This isn't a new development; but the Supreme Court has strongly reaffirmed these principles recently, in Reed v. Town of Gilbert and Barr v. American Ass'n of Political Consultants, Inc. (AAPC).

But at the same time, the Supreme Court has also ruled that content-neutral justifications sometimes can save a content-discriminatory law.

What if a city decided to zone establishments defined by a particular type of content—say, theaters showing adult movies—into a particular area of town, on the theory that such theaters attract transients and criminals and depress surrounding property values? That sort of zoning ordinance would be content-discriminatory on its face (it would apply to theaters only if they show adult movies), but it might be supported by various content-neutral justifications—what the caselaw has come to call "secondary effects."

In this adult zoning context—in Young v. American Mini Theatres, Inc. and City of Renton v. Playtime Theatres, Inc.—the Supreme Court has held that a content-discriminatory law, if justified by reference to the need to combat secondary effects, can be treated as though it were content-neutral. And this move allows courts to evaluate the law under the more forgiving standard of "intermediate scrutiny." Under that standard, a court will generally defer to a government's empirical evidence of secondary effects, and the ordinance is likely to survive constitutional challenge. Since those early cases, this principle has been applied beyond the adult zoning context, and has shown up in contexts far from adult entertainment and outside the narrow setting of zoning.

These two strands of doctrine seem to be in some tension with each other. Can content-neutral justifications save a facially content-discriminatory law from strict scrutiny, or can't they? How can we reconcile these two strands?

Easy: we can't. Several lower courts have recognized that at least some of their previous caselaw—in some cases, even including some adult entertainment caselaw—had to be revisited in light of modern cases like Reed. Other courts have assumed that Renton, though perhaps a relic of an older view, is still the law, and that the secondary effects doctrine is still good unless and until the Supreme Court overrules it. Lawyers should do their own Westlaw searches, but at least in some places, it's probably prudent to assume that the secondary effects doctrine, in practice, survives as an exception to the usual rule. (But because the scope of the secondary effects doctrine appears to be both broader and narrower than adult entertainment, the contours of this exception aren't fully clear.) So far, the Supreme Court hasn't seen fit to resolve the tension.

I don't take a position here on whether the secondary effects doctrine should survive. But, as long as we have such a doctrine, we have to determine how far it extends. This question has renewed relevance, thanks to a current trend of taxes targeting adult entertainment. These taxes—which I canvass in Part I—have been adopted in Texas, Georgia, Utah, and Illinois; there was such a tax for a few years in Tennessee; a bill along these lines was introduced in California; and the idea has been discussed in Pennsylvania. Some of these are taxes on erotic expression, some are taxes on nudity; all of them seem aimed primarily at strip clubs, based on a belief that strip clubs contribute to child sex trafficking, sex crimes, or related social ills; and the proceeds of these taxes are often devoted to a fund for fighting whichever of these problems the government has identified. Colloquially, these taxes on adult entertainment establishments have been called "pole taxes," "skin taxes," or "uncover charges."

These taxes look like traditional sin taxes, such as one can find levied on alcohol or tobacco—but alcohol and tobacco taxes, which don't affect speech, don't raise First Amendment concerns. Erotic dance is another matter. Should these taxes be evaluated under strict scrutiny, on the theory that (at least in the case of taxes on erotic expression) they're content-discriminatory on their face and any content-neutral justifications are irrelevant? Or should they be evaluated under the more deferential intermediate-scrutiny standard that applies under Renton when a law is motivated by content-neutral secondary effects?

In this Article, I make two independent arguments.

First, in Part II, I argue that erotic-expression taxes are indeed content-discriminatory and should be evaluated under strict scrutiny.

Second, in Part III, I argue that erotic-expression taxes should fail strict scrutiny because there always exists a less discriminatory option: the government could fight the relevant secondary effect by using general revenues (whether or not it uses a dedicated fund for that purpose). This is true even if the Renton secondary-effects caselaw continues to be valid in light of Reed: taxes simply don't fall within the scope of Renton. The Supreme Court has always applied Renton in the context of regulation, especially zoning and local land use, and has never used Renton to evaluate taxes.

I further argue that even if one evaluated these taxes under intermediate scrutiny—for instance, if one considered nudity taxes (which aren't content-discriminatory), or if one weren't convinced by my first argument about erotic-expression taxes—they would still be constitutionally vulnerable.

The reason is similar: under intermediate scrutiny, when the government burdens speech, the burden needs to be "narrowly tailored" to some compelling governmental interest. Narrow tailoring under intermediate scrutiny doesn't require the least discriminatory option, but the government still needs to establish that its chosen means "promote[] a substantial government interest that would be achieved less effectively absent the [burden]." In other words, the governmental action can't "burden substantially more speech than is necessary to further the government's legitimate interests."

The possibility of neutral funding is relevant here, too, because money is money; the government could fight the secondary effect equally well by raising an equal amount of money from general revenues. Under intermediate scrutiny, we need to evaluate various possible governmental interests other than just raising revenue, but I conclude that a number of plausible governmental interests are either outright impermissible or are likely to fail narrow tailoring. The governmental interest in fighting the secondary effect is the most likely governmental interest to support the tax, but even then, a number of stringent conditions must be met before the tax can be constitutional.

I conclude that, even if we accept the continuing validity of the secondary effects doctrine—even if the Supreme Court ends up reaffirming the doctrine as an exception to the facial-discrimination approach that would otherwise apply—taxes on erotic expression or nudity are still likely unconstitutional. And this isn't an argument for changing current blackletter law: my reasoning only directly contradicts the holdings of two state supreme courts.