California Catholic Daily, 5/20/08 - Even in the face of an estimated $20 billion budget deficit, a bill that would raise revenues by imposing a 25% tax on earnings of the pornography industry is meeting with stiff resistance in the California legislature, with opponents claiming it would drive a multi-billion-dollar industry out of the state.

The bill, AB 2914, authored by Assemblyman Charles Calderon, D-Whittier, would levy a 25% tax on gross revenues from the sale of pornographic magazines, photos, books, films and videotapes, and on the gross earnings of live sexually explicit entertainment and pay-per-view pornography provided to hotel guests.

According to a legislative analysis of the bill, it could raise up to $665 million a year in new revenues for the financially strapped state.

"AB 2914 would tax adult entertainment and adult entertainment venues in a manner similar to the way in which cigarettes and alcohol are already taxed in this state,” said Calderon in the legislative analysis. “Currently, these two products are taxed at higher rates, and the additional revenues are used to address the negative effects of their use. This measure would tax adult entertainment in a comparable manner, with the intent to use the funds to address the various secondary effects associated with the production and consumption of adult entertainment. The secondary effects of production are especially noteworthy as California is the capital of the adult entertainment industry in the United States.”

Money raised by the new tax would be used for “law enforcement, testing and treatment of sexually transmitted diseases, treatment for drug and alcohol abuse, health care and mental health treatment," said Calderon. "AB 2914 does not make a judgment on the adult entertainment industry. It merely asks the industry to help mitigate some of its ancillary effects in the state that is its production capital, not unlike the state already does with alcohol and cigarettes."

At a May 12 hearing, opponents testified that imposing a 25% tax on porn industry profits could drive the business out of California, at a cost in jobs and other revenues of as much as $3.5 billion. It would have an especially hard impact, witnesses testified, on the San Fernando Valley, said to be the “porn capital of the world.”

Republicans in the legislature have indicated they would vote against the bill because it is a tax increase and they oppose any tax increase of any stripe. Under state law, tax increases require a 2/3 majority of both houses of the legislature.

Porn Industry Responds To Tax Proposal

NBC11.com, 5/30/08 - California's adult entertainment industry responded Thursday to a proposed 25-percent state tax on the sale of all pornographic material.

Industry business owners said the tax would force many operations to leave the state.

Assemblyman Charles Calderon, D-Whittier, said the tax would raise at least $700 million per year.

"It is a massive industry in California," Calderon said. "We don't know, it may be the No. 1 industry in California."

The proposal remains in committee.

The porn industry has been vocal in California politics before.

Earlier this month, adult entertainment industry stars traveled to Sacramento for a hearing. Opponents of the bill said the large tax increase constitutes censorship and would make California products less competitive.

In April 2007, a coalition of porn stars, live dancers and other adult entertainers flocked to the state capitol fees to protest against adult entertainment businesses.

Karen Stagliano, of adult film studio Evil Angel Video, said the bill's passing would have a negative impact on the state's economy.

"If we're going to another state and were hiring crews there, people here would have less work here." Stagliano said.

Steve Hirsch, president of Vivid Video said the tax would likely force the business elsewhere.

"If we're talking about a 25 percent tax, we're talking about millions and millions of dollars of impact to the adult business," Hirsch said. People will lose jobs, and people may go other places.

One porn industry lobbyist said the tax hike could cause the entire adult entertainment industry in California to move out of the state, taking 40,000 jobs with it.

Also...

Constitutional Concerns Arise Over Internet Porn Tax

By Gene J. Koprowski, E-Commerce Times 8/11/05

Taxes levied on the Web sites will be sent to an Internet Safety and Child Protection Trust fund at the Internal Revenue Service. Portions of the funds raised through the tax will be used for sex crime prosecution at the Justice Department, and some will be allocated through a competitive grant process to non-profits to support work that promotes Internet child safety.

A new bill introduced by a Democratic Senator from Arkansas aimed at taxing online porn sites -- at a 25 percent rate -- is raising Constitutional concerns among legal scholars. The bill is called the Internet Safety and Child Protection Act of 2005 (S 1507), and has been referred to the Senate Finance Committee.

"Many Internet service providers have taken significant steps to provide parents with tools to protect their children from inappropriate material on-line and they should be commended," said Sen. Blanche Lincoln (D-Ark.). "But sadly, many adult-oriented Web sites in today's online world are not only failing to keep products unsuitable for children from view, but are also pushing those products in children's faces. And it's time that we stand up and say, enough is enough."

Constitutional Concerns Representatives Jim Matheson and Robert Menendez -- both Democrats -- have introduced similar legislation into the House of Representatives.

The legislation comes as a new report is being published by Third Way, a moderate think tank, which reports that children between the ages of 12 and 17 are the biggest viewers of Internet porn, and that children are, on average, exposed to online pornography at age 11.

Though the goal of protecting children is laudable, the means to achieve that goal, in the Lincoln bill, may not be Constitutional, scholars say.

"Complicating matters is the bill's questionable constitutionality. The Supreme Court has not been friendly to Congressional attempts to regulate Internet porn. And the Supreme Court has, in the past, struck down taxes that differentially burdened constitutionally protected speech," writes Eugene Volokh, a professor of law at UCLA , former law clerk to Justice Sandra D. O'Connor, and opinion-maker in his blog, The Volokh Conspiracy . "It seems likely that an Internet Porn tax will be subject to judicial scrutiny in a way that a fat tax would not be."

Other scholars note that the Supreme Court in the 1930s threw out a two-percent tax on newspapers, which was aimed at using the government's taxing power to censor opposition press. Another tax case, Minnesota Star v. Minnesota Commissioner of Revenue, was rejected by the Supreme Court, which ruled that it was illegal to tax paper and ink products used by newspapers.

To try to circumvent these well-established precedents, Lincoln's bill is narrowly tailored. The bill applies only to online porn sites which are already subject to intensive record-keeping requirements -- as to the age and identity of the persons who appear in the online content as models or actors. To further narrow the law, and prevent children from accessing the sleazy sites, the bill requires online porn merchants to verify the age of the visitor -- even before free images or other content are shown. This will be accomplished by requiring credit card companies to process only those transactions which are submitted by consumers whose ages have been verified.

FTC Empowered The bill indicates that violations of the rules will be prosecuted by the Federal Trade Commission , the government's anti-fraud agency.

Taxes levied on the Web sites will be sent to an Internet Safety and Child Protection Trust fund at the Internal Revenue Service. Portions of the funds raised through the tax will be used for sex crime prosecution at the Justice Department, and some will be allocated through a competitive grant process to non-profits to support work that promotes Internet child safety.

Many ISPs are already cracking down on Internet porn. Recently, Yahoo (Nasdaq: YHOO) shut down all its user-created Internet chat rooms, citing concerns that pedophiles were soliciting minors there -- enticing them with Internet porn.

"Currently, there are over 300,000 pornographic Web sites," said the National Commission for the Protection of Children and Families, a lobbying group in Washington D.C., in a statement. "This number is growing every day."

Also ...
Tennessee Researching Possible Porn Tax
Adult Businesses Get More Restrictions and Taxes
Religious Right Objects to Online Porn Tax

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