SOB Tax Stripped Again

Amidst all the post-session hub-bub, on June 5 the Third Court of Appeals released its judgment on the infamous "Titty Tax." Like the 53rd District Court before it, the appellate court decided that the $5 admissions surcharge on sexually oriented businesses is a straight First Amendment violation, and that the state should stop collecting it right now.

A quick reminder: Back in 2007, the legislature passed House Bill 1751, which was ruled unconstitutional. The state appealed to the Third Court of Appeals, but have now lost that appeal on a two-to-one judgment.

In spite of this, the attorney general has filed a petition for review with the Texas Supreme Court. Complaining that the judgment "constitutes an unprecedented interference with government efforts to regulate alcohol and combat rape," it asks the state's highest court to overturn both lower courts and re-instate the tax. The state argues that, because it's constitutional to ban nude dancing where alcohol is served, it must be constitutional to restrict it by taxation. In the majority opinion, Justice Diane Henson demolished that argument, and compared it to the old example of yelling "Fire!" in a crowded theater. That's what's dangerous, and if the state wants to equate that to serving booze in a strip club, then the tax is like selling a "Fire!"-yelling license.

Astonishingly, the Texas Association Against Sexual Assault, which blocked attempts to reform or replace the tax last session, put out a positively ebullient press release which argues that "the momentum has shifted dramatically in our favor over the past week." TAASA Deputy Director Torie Camp told the Chronicle that the speed of the filing indicates that they must have a strong case.

Illustration by Doug Potter

So who keeps pushing the state down this path? The Comptroller's Office has been placed in an extremely awkward situation by this poorly written bill. If they enforce the law as written, it could actually cover everything from adult cabaret to productions of Hair to cheerleading competitions if there's beer present and a known risk that a uniform might ride up a bit. To do so would be an unconstitutional tax on expression. As is, they've written enforcement rules that only cover strip clubs, which means not only is it a First Amendment violation, but it's also being unequally applied, which arguably also violates the Texas Constitution.

It can't all be put at the Attorney General's door, either. Sen. John Carona, D-Dallas, told Legeland that he was hearing differing takes from the AG's office on the strength of their case.

At this point, the smart money seems to be on Solicitor General James Ho, who took the case on from Assistant Attorney General Jim Todd after he lost the first case. It's Ho that's tried to re-tool this as a booze bill, not a boobs bill. As he told the House Ways and Means Committee, "The message of the law is simple: Remove the alcohol, avoid the fee."

Actually, there's another option: Stop nude performances, and that's what original litigant Karpod Inc. has done at their Players Gentleman's Club in Amarillo. Again, it's worthwhile pointing out that while it is at the very edges on protected free speech, stripping is still protected free speech. Ho's upbeat attitude ignores that this could well be presented as the first example of the chilling effect of this bill.

Illustration by Jason Stout

Ho has repeatedly pushed that this is about rape reduction through taxation, but there are two problems with that: Firstly, during original passage of the bill, author Rep. Ellen Cohen, D-Houston, repeatedly said that she was not trying to establish any link between strip joints and sexual assault. She and her staff argued that money from businesses that primarily employ women going to a fund that primarily benefits women was an "apples to apples comparison."

Secondly, the main expert testimony that Cohen, Ho and TAASA have depended on is a study by UT's Bureau of Business Research (download the PDF here). The report is really split into two halves: An economic study of SOBs, and a study of the relationship between SOBs and sexual assault. That second part is really a study of the extant literature: As anyone that has spent time in academia can tell you, a lit review is the first step in any major research, but only the first step. Its conclusion was that "no study has authoritatively linked alcohol, sexually oriented businesses, and the perpetration of sexual violence" and simply recommended that further study is merited.

So what the state is now depending on is the Supreme Court siding with the one judge that's gone in their favor, Justice David Puryear. In his dissenting opinion, he wrote, "Expert testimony was introduced stating that viewing erotic entertainment while consuming alcohol increases the likelihood that sexually assaultive behavior will occur" and that it would not have been unreasonable for lawmakers to take that into account when passing the bill.

But here's the big problem for the state. When Judge Scott Jenkins made his original lower court ruling, he wrote that because the First Amendment violation was so clear, there was no reason to even take up the state constitution violations. Puryear wrote that, while he didn't think the tax is unconstitutional, if he had his druthers, he would "remand the case for consideration of the other issues raised."