In recent years, legislators have looked at ways to stop film and TV studios from moving their production to other states. Now opponents of a new bill say a legislator could run an even bigger industry out of California.

AB 2914 is the third attempt by Assemblyman Charles Calderon, D-Whittier, to impose a tax on adult businesses. Reached on Wednesday, Calderon said that his office is looking to clarify the language. But the final language will keep a 25 percent tax on both the sale and production of adult materials, he said. The total tax on any one DVD or magazine, he said, would be capped at 50 percent.

During a press conference on Monday, Calderon said that the production of adult materials won’t leave because only California has a friendly-enough legal environment. He cites a 1982 California Supreme Court case, State of California vs. Harold Freeman. The court ruled that the production of adult films did not constitute pandering—pimping, in more colloquial terms—and is therefore legal. No other state has this legal precedent, Calderon said.

By most estimates, around 90 percent of the primary domestic production of adult entertainment—that is, the shooting of videos and photos—occurs in California, most of that in a small portion of the Los Angeles area. Nationally, adult businesses—from videos to strip clubs to adult toys—bring in at least $10 billion a year, according to Forester Research. 

“I’m sure it would take a month or two,” said Larry Kaplan, executive director of the Association of Club Executives of California, a trade group representing California’s 176 strip clubs. “I believe the author of the bill has grossly underestimated the options of the industry. He thinks he’s got a captive audience that will accept this pact.”

One thing both sides agree on is that the production end of adult videos, magazines and websites employs many thousands of Californians; the industry records more revenue each year than “legitimate” Hollywood. If these performers, producers, camera people and others leave, Kaplan said, the resulting loss in tax revenue could meet or exceed the revenue the Calderon says the tax would bring in.

The bill has the backing of several labor groups. Emily Clayton, policy coordinator with the California Labor Federation, said she doesn’t believe the industry would leave.

“We hear that type of argument from every industry every time there is a tax proposed,” Clayton said. “That’s a very common argument for them to all fall back on. We’re convinced the industry is profitable enough, and they have a lot of reasons to stay.”
Calderon said that he believes that once all of the “negative secondary effects” of the industry are factored in, the multi-billion industry is actually a drain on the state budget. Yes, the actors, camera operators and others pay taxes on their income and spend money in the state. But Calderon claimed that the impact on drug abuse, sexually transmitted disease, mental health and other problems on state programs is huge.

According to the language of AB 2914, the bill would set aside some of the money to deal with the negative effects of this industry. The press conference included testimony from a Shelley Lubben, a former adult film star, who founded the Pink Cross Foundation to do outreach to help performers get out of the business. She and another woman active with the group, former stripper Daphne Khoury, testified that the industry is rife with drug use, coercion, prostitution and rape.

But Calderon said that on impact of the state budget crisis is that there isn’t money to study the actual cost of these problems: “If I introduced a bill that provided money for a study, it wouldn’t get out of committee.”

Jeffrey Douglas, board chair with the industry-affiliated Free Speech Coalition, said that Hollywood film studios have already shown how easy it is to leave. Adult productions, with their smaller casts and lower production values, would have an even easier time. In fact, he said, adult industry production is already dispersing, albeit to a small degree so far.

“The two places where the adult industry are most likely to migrate are Florida, where there is already a significant adult industry, and Nevada, which has proximity and weather,” Douglas said. He added: “If California were to give an incentive for that production to leave the state, even by a small percent, it’s gone. The reason it’s here is essentially tradition. Dollars undermine tradition every time.”

Those are hardly the only choices, Kaplan said. New York, he said, has a similar court decision. Oregon has a liberal constitution that, according to his reading, would allow adult film production.

Calderon contested these claims. He cited a 1970s case, State of New York vs. Harold Kovner, which found that New York’s pandering laws prevent adult video production. Meanwhile, Florida has a similar case currently making its way through the courts, Florida vs. Ray Guhn. If that state succeeds in shutting down Guhn, Calderon said, production in that state would have to go underground.

“I don’t believe they have anywhere else to go,” Calderon said. He added: “Every other state that has looked at this issue, it appears, has ruled contrary to California. What’s the basis for them to think they’re going to get better treatment in Oregon?”

Not so fast, said Allen Lichtenstein, general counsel for the American Civil Liberties Union of Nevada, who also represents several adult entertainment companies. Clark County, which includes Las Vegas, has zoning ordinances allowing adult film production in certain areas. In fact, he said, people have been openly making adult films there since the early 1990s, he said.

“I’ve been doing my job for a long time, and I’ve found that certain politicians seem to think they’ll get some mileage out of going after adult entertainment,” Lichtenstein said. “Usually it backfires. It’s something the public wants.”

Sgt. Wayne Bilowit, legislative advocate for the Los Angeles County Sheriff’s Dept., said that he also doubted that an industry that was so “entrenched” would leave. He testified on Monday about the “negative secondary effects” strip clubs and other venues have caused for his force due to an increased need for police calls.

Matt Gray, a lobbyist representing several adult industry groups, said that according to their reading of California laws, the “negative effects” can be remedied either by zoning ordinances or taxation.

“You don’t get both,” Gray said. He added that you would see immediate filings from “first amendment attorneys” that would “allow these businesses to open up next to schools, churches and City Hall, where they can get a lot more business.”

Calderon’s dismissed these claims, noting the bill is specifically written not to supersede local zoning ordinances. However, Bilowit said that the Los Angeles District Attorney’s office is currently writing a legal opinion on this very issue, but the results were not yet available.

Gray, Kaplan and Douglas all said that studies have failed to show significant negative secondary effects from the industry—and that Calderon’s bill does little or nothing to fix any such problems anyway, beyond some vague promises to fund existing programs.
“Mr. Calderon’s bill is flaccid on actually solving any problems,” Gray said.

In any case, the LA Sheriff’s Bilowit noted that this is a tax bill, subject the nearly “impossible” to reach two-thirds voting requirement. Just as labor supports it on the idea that it will raise revenues, he said, Republicans will oppose it simply because it’s a tax.

“They might not vote against it, so it can’t be used against them in later elections,” he said. “They just won’t vote.”

But Calderon said that they May budget revision—currently pending as of press time—could change Republican minds.

“If they do see a revenue solution as needed, this would be a bill they might consider voting for,” Calderon said.