Perry vs. the Lap Dance Lobby

by Alec MacGillis | September 13, 2011

Rick Perry’s campaign for the presidency largely consists of touting the pro-growth policies of Texas—a state with no personal income tax, and the 47th lowest tax burden in the country—as a model for the rest of the United States. Perry’s claim is that his state, where he has served as governor for the past 11 years, has found more creative and more business-friendly ways to fill its coffers. 

Don’t tell that to one of the state’s most vibrant industries: its nearly 200 strip clubs. They are caught in an endless legal battle with the state that points to the downside of the Texas approach to revenue collection. By singling-out easy targets, Perry hasn't cultivated a pro-business atmosphere, but rather a mixture of distrust, resentment, and non-compliance among those who are supposed to be ponying up.

The $5-per-customer tax on strip clubs that Perry signed in 2007—which goes by a number of nicknames, the most clever of which is the “pole tax”—was to fund an array of programs relating to sexual assault prevention and counseling, as well as subsidies for a sliver of the six million Texans without insurance. In a state with no income tax, helping those without health coverage fell to, well, those looking for women who aren’t covered. “That’s where we’ve come to,”  Garnet Coleman, a Democratic state representative from Houston, told me.

The tax wasn’t expected to raise all that much—about $30 million per year. But the strip-club lobby—yes, there is a strip-club lobby—was quick to challenge the tax’s constitutionality. It won at the trial and appeals court, but the state Supreme Court went the other way last month, rejecting the lower courts’ findings that the tax abridged the clubs’ First Amendment right to free expression and that it failed to establish a plausible link between stripping and health care. The court invoked U.S. Supreme Court Justice Antonin Scalia’s language in a 2001 ruling upholding a Pennsylvania town’s restrictions on nude dancing: “The traditional power of government to foster good morals (bonos mores), and the acceptability of the traditional judgment …that nude public dancing itself is immoral, have not been repealed by the First Amendment.”

The case isn’t over yet—it’s been remanded to the lower courts to settle tax law questions that could take a couple more years to resolve, and that’s assuming the clubs don’t appeal last month’s ruling to the U.S. Supreme Court. But the pole tax has already sown considerable strife within the Texas night club universe. Some clubs have been dutifully paying the tax—it’s raised $15 million so far—while others have used the court case as an excuse not to pay, despite threatened penalties.

The rift is biggest in Houston, where clubs were already in a long-running battle with each other and city officials over rules restricting their locations and how much skin dancers can show. While some clubs hew to the rules, unlicensed “bikini bars” are popping up wherever they please, claiming a difference in kind that is hard to discern. Now they claim the additional advantage of not being liable for the pole tax.

The inconsistent and arbitrary effects of Perry’s policy were on full display during a recent spin through Houston’s demimonde. One fully licensed club, which used to have a $5 cover charge, had now raised its entry fee to $8—$5 for the state, $3 for itself. That not only left the club with significantly less revenue, it also reduced the turnout: There were clearly fewer people willing to pay more to get in the door.

Close by were a competitor operating under what the manager cheerfully described as the “bikini bar pretense,” charging $7 and keeping it all for itself, and a club that claims to be fully licensed but whose manager was distinctly fuzzy on whether the $5 cover charge was going toward the tax. “You’ll have to call corporate,” he said. Corporate did not call back.

It was hard not to feel for the owner of the first place, sending his $5 increments from his dwindling clientele to Austin while his rivals blithely flout the law. The owner, who asked that his name not be used because he feared official retribution, erupted when asked about the tax.

“This is fucking ridiculous,” he said. “I came to the United States believing in free expression, that you could do what you want to do, but the government has stepped too much on our heads…Why are they targeting a particular kind of business? If they get away with this shit with us, they’ll go on to the discotheques next and say ‘a $5 tax on you.’” So did he want a state personal income tax instead? No, that would raise too much money. He just wanted all businesses taxed equally. “Make it fair,” he said.

Will the court ruling, if upheld, at least bring relief to the state’s uninsured? Well, no. The health care program that Perry was planning to use the money for was never set up, because the Bush administration in 2008 deemed it inadequate. The state’s uninsured, who include a third of all adults between 18 and 64, can continue to seek out indigent care at hospitals, or, if they live in the Rio Grande Valley, attend the annual week of free clinics run there by the Texas National Guard, which the state justifies as disaster training for the soldiers. Beyond that, Texas’ uninsured will have to wait for the new national health care law’s reforms in 2014. (That’s assuming, of course, that Perry and other anti-Obamacare governors don’t succeed in halting the law.)

The odds of Democrats taking up the cause of strip club owners is admittedly slim. Still, far from being intimidated by Perry’s pride in his jobs record, they should realize they have a potential foothold in the governor’s own backyard: A small business sector that wouldn’t mind some straight talk on taxes.

Alec MacGillis is a senior editor at The New Republic.

Source URL: http://www.newrepublic.com//article/94829/perry-strip-club-tax