The Topless Tax Sequel, Part III

The Lege's Titty Tax refuses to die

The Topless Tax Sequel, Part III
Illustration by Jason Stout

House Bill 1751 – aka the "Titty Tax" – was supposed to be a social-service panacea: paying for sexual-assault survivor programs and indigent health care by charging $5 every time someone goes anywhere where there's a combination of booze and nakedness.

But two years after passage (and four years after a failed attempt to tack the bill on to the public-school finance bill in 2005), the surcharge is in limbo – condemned by First Amendment experts as an ill-defined tax on content, ruled unconstitutional in court, and now stuck in legal appeals. Undaunted, legislators are now working on a replacement that looks almost identical. Meanwhile, the comptroller's office has been collecting the surcharge from the state's 167 sexually oriented businesses. The tax has gathered $11.2 million since Jan. 1, 2008 – well below the $18 million a year bill author Rep. Ellen Cohen, D-Houston, said it would produce for abuse programs and nowhere near the $87 million projected for the biennium. All that cash sits in the sexual-assault program account, unspent.

At trial last March, Judge Scott Jenkins of the 53rd District Court, calling the surcharge "unconstitutional and invalid," granted the Texas Entertainment Association a permanent injunction against the tax (see "Topless Tax Terminated," April 4, 2008). But just weeks later, Judge Stephen Yelenosky of the 345th District Court upheld a suspension of the injunction pending appeal. And on Feb. 11, the 3rd Court of Appeals heard a request by Attorney General Greg Abbott and state Comptroller Susan Combs to reinstate the tax. The court's opinion is pending.

At the appeal hearing, Texas Solicitor Gen­eral James Ho told the court that the tax is not an attempt to restrict free speech. The businesses have choices: Lose the alcohol, put more clothes on their performers, or pay up. In response, TEA attorney Craig Enoch said that one firm had already made that choice: Karpod Inc., the co-litigant in the case, had stopped its nude dancing. Describ­ing the state's argument as "seductive" in linking sexually oriented business and sexual assault, he said the surcharge remains "a payment on the right to exercise free speech. ... We wouldn't need a First Amendment if it only protected speech that everyone agreed with."

Yet even while the appeal is pending, the Texas Association Against Sexual Assault is working with Cohen on a new version of the tax to fix a bill that has seemed unfixable for the last two sessions. A major argument against HB 1751 was that it defined nude performance so broadly that it would have swept up everything from strip shows to productions of Equus. It ultimately collapsed as the comptroller's office struggled to develop rules that didn't read like a morality code, and Tax Policy Division staff pondered the taxable status of string bikinis vs. wet T-shirts (see "Return of the Titty Tax," Dec. 7, 2007). "It was never our intention to tax traditional theatre," said TAASA Deputy Director Torie Camp, "and we'll be working with [the Texas Legislative Council] to ensure that [it is] not taxed."

For Camp, the issue is about where the money goes. Part of why Judge Jenkins granted the original injunction was that a portion of the surcharge went into the Texas health opportunity pool. "The court said that there was a link between live nude entertainment, alcohol, and sexual violence," said Camp, "It just didn't find a connection between live nude entertainment, alcohol, sexual violence, and indigent health care." (Jenkins actually said the state presented "persuasive trial evidence" of a link, without indicating whether he had been persuaded.)

Cohen called the new tax "basically the same bill. If it's determined that the money can't go to indigent health care, we'll lower the fee, and it will go purely to sexual-assault programs." As for fears that any bill language will hit the wrong businesses, she said: "We really didn't have an issue with that. I look at it from one perspective, and in our crafting of the language ... it's clear in its definitions."

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sexually oriented businesses81st Legislature, 81st Legislature, Ellen Cohen, Scott Jenkins, Stephen Yelenosky, Texas Association Against Sexual Assault

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