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Davis, California

Friday, December 3, 2021

California lawmakers look to tax adult entertainment

California’s massive adult entertainment industry might be able to help the state out of its current budgetary woes.

A bill working its way through the legislature aims to impose a 25 percent tax on income received from adult entertainment venues – colloquially referred to as strip clubs, adult bookstores and “peep shows.” It would also extend to the purchase of adult magazines, merchandise and pay-per-view movies.

Assembly Bill 2914, sponsored by Charles Calderon (D-Montebello), would use the tax revenue to mitigate the cost to taxpayers of “secondary effects” generated by the industry, such as law enforcement at adult venues, testing and treatment for sexually transmitted diseases and other social services.

“There is a high rate of drug and alcohol abuse in the industry, STDs, mental health problems and pregnancies,” said Tom White, Calderon’s chief of staff. “The industry is such that oftentimes people get burned through and come out with nothing, no job skills or education, so they need job training or state services.”

The bill would create an Adult Entertainment Impact Fund and use the proceeds to fund state services utilized by the industry. It could raise as much as $665 million in tax revenue each year from the $4 billion per year adult entertainment industry, Calderon said.

“[Calderon] is carrying this bill because we’ve got a budget crisis and he looked around and found that we’ve got an industry huge in the state that by its presence creates an impact on services,” White said. “We believe they should pay for the impacts they have on the state and state services.”

Opponents of the bill argue it is unfair to tax them above standard corporate and sales taxes because the negative effects of adult entertainment venues are overblown.

“There are a lot of myths about the industry that are perpetuated,” said Angelina Spencer, executive director of the Association of Club Executives which represents adult nightclub owners. “They constantly talk about the harmful effects based on studies, but when you do more in-depth research on those studies, you find out that they aren’t viable.”

Spencer pointed to peer-reviewed studies conducted by Duke University and the University of North Carolina at Chapel Hill which found secondary effects of adult venues to be 70 percent fewer than often-cited numbers suggest.

“It’s really serious to me why those [studies] are excluded by legislators,” Spencer said.

California’s Legislative Analyst’s Office has found, however, that the negative secondary effects of the industry are well established, according to the office’s report.

“When the city of Los Angeles conducted a comprehensive study of [adult entertainment venues] it concluded that such establishments are associated with higher rates of prostitution, robbery, assault and theft in surrounding communities,” wrote analyst M. David Ruff in the report.

Whether the effects of the industry are overstated or not, opponents of the bill argue that this is an arbitrary tax and unfairly targets a misunderstood industry.

“It’s not just about our members, it’s about any business segment,” Spencer said. “What arbitrarily starts in one industry could trickle down.”

The bill’s author maintains that this is not meant to make a value judgment on the industry.

“In no way is it a comment one way or another on the industry,” White said. “It is huge, it’s here and it’ll stay here. The bill is recognition that it’s here but not a comment on whether it’s good or bad.”

The bill is currently awaiting further consideration in the Revenue and Tax Committee and is expected to be heard by the committee in early June.

 

ALYSOUN BONDE can be reached at city@californiaaggie.com.

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