From the California Catholic Daily:
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.
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.
This is kind of a strange tax issue. One of the things that concerns me about what government entities choose to "special tax", for whatever purposes and whatever special rate, is the investment by that government into the success or failure of the subject of that tax. I know that there are some that speculate that such a tax in California would squeeze the porn industry out of California, but I think there's just as great of likelihood that the porn industry would receive special business benefits from future government policy once the state government got a taste for the tax revenues.
In other words - governmental protection. I don't care either way if California would do this, but I think that those looking at this issue ought to realize the potential. Looking at a tax policy as a way to drive an industry away might actually backfire because of a government's need for revenue.