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New York's Proposed 'Entertainment Tax' May Be Unconstitutional

Though applicable only to New York businesses, passage could mean hundreds of jobs lost

New York's Proposed 'Entertainment Tax' May Be Unconstitutional

ALBANY, N.Y. - As part of an attempt to plug a $15 billion deficit in the New York state budget, Gov. David Paterson has called upon legislators to approve a 4 percent tax on "digitally delivered entertainment services" - including iPod downloads and online porn.

The proposed tax on downloads is just one area of a larger bill for "entertainment-related consumer spending". Other portions of the bill target cable and satellite TV networks and "personal services" including "massages" (a frequent euphemism for prostitution).

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At least one constitutional scholar questions the legality of such a tax.

"If the tax were limited to [MP3, porn and other entertainment downloads], there would be some substantial problems," said attorney Reed Lee, an expert in constitutional law. "If it's an attempt to tax all Internet traffic, whether that be downloading the latest NASA pictures from Mars for scientific purposes or what, as well as entertainment downloads, then that has a much better chance of passing constitutional muster. In general, a tax designed to impose a burden on specific expression will face the most serious constitutional obstacles in court."

Lee cited two late-'80s cases involving the Minneapolis Star Tribune newspaper and the Arkansas Writers Project. In the Minneapolis case, the government tried to place a sales tax on newsprint - and failed.

"A government can impose a sales tax on newspapers and magazines, so long as it also imposes a sales tax on everything else," Lee explained. "But a sales tax on only newspapers and magazines might pose a serious constitutional problem. And one imposed only on Playboy and Penthouse would face virtually insurmountable problems."

Gov. Paterson's proposal follows the failure of Assemblyman Charles Calderon's attempt to tax porn in California. A similar measure is now under consideration in the state of Washington.

"When we saw the same thing introduced in California, the 25 percent tax, we seriously considered picking up and moving our operation to another state," Vivid Entertainment co-chairman Steven Hirsch told AVN. "This tax applies to iPod downloads, applies to any type of movie download; what we're talking about in total, according to New York State, is $15 million. So to potentially lose several businesses who employ several hundred people in the state of New York for the adult industry's small piece of that $15 million just makes no sense."

Hirsch pointed out that proposing a porn tax is easy for state legislatures.

"You know, it's easy to pick on the porn guys when things are tough," he said, "because no one's going to stand up and say, 'Don't tax my porn.' Sex is a very private thing, and the vast majority of people choose to watch it in the privacy of their own home. It's a very anonymous thing, so when it comes to something like this, consumers are not necessarily going to take the lead."

Adult producers aren't the only ones opposing the New York tax. Some of the backlash against the bill comes from an unlikely source: The New York State branch of the Conservative Party.

"By taxing [porn] you're legitimizing it," said Conservative party chairman Mike Long. "You're sending a message to the children, you're sending a message to the teenagers, if you're taxing it - how can it be wrong? ... It's absolutely outrageous if they're profiting off of pornography. If they're raising funds, it's encouraging the citizens of this state to download it." 

Hirsch argues that taxing downloads would damage a sector that provides consumers with much-needed relief during the recession.

"These are difficult times, and people are going out less; they're staying home more, and they're watching movies and downloading movies on their Friday and Saturday nights," Hirsch said. "To now go after the companies that are producing the movies or the companies that are based in New York is just pointless."

Perhaps it will lead to a new rallying cry: "No Taxation Without Fornication!"






Related Content:

Reed Lee
Mark Kernes

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