New sin tax greets Texans in 2008 | AccountingWEB

New sin tax greets Texans in 2008

In the continuing effort to raise taxes and increase state coffers, Texas has added a new tax to the mix. The tax is to be assessed on customers of strip clubs. Proceeds from the new tax, which some are calling the Pole Tax, will help victims of rape.

Effective January 1, 2008, Texas will require strip clubs to collect a $5-per-customer levy. Club owners are arguing that the tax infringes on their First Amendment right to freedom of expression, that it will drive some bars out of business, and that it unfairly links their industry to sex crimes.

"We'll be fine. I've already stopped advertising, and we're raising our cover charges. But this is going to kill some of the smaller clubs," said Dawn Rizos in an Associated Press story. Rizos runs The Lodge, a Hemingway-inspired place that has exotic animal heads on the walls and is packed after Dallas Cowboys games at nearby Texas Stadium.

There are approximately 150 strip clubs in Texas. Owners of many of the clubs have sued the state in an effort to block the tax. State officials estimate the Pole Tax will raise more than $40 million a year, based on liquor sales figures. If accurate, the estimate suggests at least 8 million people a year go to Texas strip clubs to get a lap dance or watch women pole-dance in a G-string.

"This is an industry that largely employs women, and this gives them an opportunity to raise funds for a crime that affects women," said state Rep. Ellen Cohen, a Houston Democrat who sponsored the bill, approved by the Legislature in May.

Owners of some of the smaller clubs and bars where pole dancing takes place are concerned that the $5 tax could drive away customers and force them out of business.

"They won't pay it," said Chandra Brown, president of the company that owns Players. "They won't come in. They can't afford it."

In their lawsuit, the clubs claim that nude dancing is protected by the First Amendment and the state can't selectively tax it, even if it is conduct some may find offensive. Besides, they argue, the tax is so broad it could apply to concerts by performers like Madonna or Britney Spears who wear low-cut tops.

Jonathan Turley, a constitutional law expert at George Washington University, said the Texas tax goes too far.

"It seems clear legislators are targeting strip clubs because they're unpopular," Turley said. "Laws like this would expose any unpopular industry to punitive taxes. It could be abortion clinics."

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