Large tax will be hard on local adult industry

Tuesday, April 4, 2006

A proposed 25 percent tax on adult entertainment in Rhode Island has created tension between nightclub owners and lawmakers over legislating morality versus generating revenue for the state.

The bill defines “adult entertainment business” as “any business, bookstore or video store at which any nude or partially denuded individual … performs any service” on the business premises for payment. If passed, the act would affect gentleman’s clubs, strip clubs and other area businesses.

Thomas Tsoumas P’03, the managing owner of Foxy Lady, a Providence gentleman’s club, vehemently opposes the bill, calling it “unconstitutional” and the “ultimate, consummate insult.”

Tsoumas said the proposed tax is designed to discourage adult entertainment in Rhode Island.

“It’s being pointed toward a particular segment of business,” he said. “Are they taxing Wal-Mart? Is Costco involved? Why aren’t they involved? … Why just businesses associated with sex?”

The bill’s sponsor, Rep. Elizabeth Dennigan, D-District 62, told the Providence Journal the bill is intended to generate revenue and is not based on morals. Dennigan could not be reached for comment.

But Rep. Fausto Anguilla, D-District 68, another sponsor of the bill, said adult businesses create problems in their communities.

“Often, these businesses are located in fairly depressed areas. Most people would agree that property values decrease when this type of business moves into a neighborhood,” he said. “You have to look at what business takes out of a neighborhood, as well as what it puts in.”

“I think that every business has an obligation to give back to the area in which in which it’s located,” Anguilla said. But, he added, “My intent is not to run anybody out of town.”

Tsoumas disagreed.

“We’re like any other business – except now they’ve singled us out to be the source of additional revenues. … It would virtually put our businesses out of business.”

But others in the adult industry are not so strongly opposed.

“It can be both good and bad,” said Angelina Spencer, executive director of the Association of Club Executives, the trade association for adult nightclubs in the United States.

“Good, because anytime you impose a tax on adult entertainment you legitimize the industry and say, ‘We welcome you,'” she said.

On the other hand, she added, “25 percent is excessive. … If you overtax any business you cut into the bottom line. There isn’t a corporation around that wants be taxed to death. If you went outside any other business and said this, they’d be screaming.”

Tsoumas echoed Spencer’s sentiment, pointing to other entertainment venues that would not be affected by the bill.

Tsoumas also criticized the bill for singling out the adult entertainment industry rather than taxing other forms of entertainment, such as the Trinity Repertory Theater or sexually explicit films.

But Spencer said morality will inevitably play a role in the debate over the tax.

“No one’s going to care if we excessively tax adult entertainment, due to the nature of the business,” she said. “What starts in adult entertainment will trickle down to other industries,” he added

“If this excessive tax passes – and I agree with the owner of the Foxy Lady, there are lots of constitutional (issues) here – other business owners outside of adult entertainment should start asking themselves, ‘Who’s next?'”

Spencer and Tsoumas both said they sympathize with the state’s financial plight. The General Assembly is currently trying to close a $300 million budget gap.

But, Spencer said, “I don’t think taxing adult entertainment is the way to find (money).”

Tsoumas agreed.

“It is patently unfair to single out one segment of the society that operates legitimate businesses with competent people” to raise revenue, he said.

Tsoumas said he has worked in the adult entertainment industry for three decades.

“I would take my host of professionals and put them up against any other managerial staff, against any other business in the state. I am so proud of them. What people are saying (with this legislation) is that our business is less legitimate.”

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