Thursday, March 06, 2003
Copyright © Las Vegas Mercury

Sex and taxes

Lawmakers ponder proposal to tax state's brothels

By Larry Wills

Cash-strapped Nevada is not only out to gouge smokers, drinkers, golfers and movie fans with higher taxes, it's going after tricks. Not the magical kind, but the "coffee, tea or me" action at the state's 28 licensed brothels.

"We're going to sit down and have a little discussion," Assemblyman Rod Sherer, R-Pahrump, says of the brothel industry, which generates at least $36.5 million a year. He says the brothels "are going to come to the table and bring a proposal," rather than have the state Legislature arbitrarily impose its own solution.

The idea of taxing brothels is being pushed by Assemblywoman Sheila Leslie, D-Reno, who says it would be a natural extension of Gov. Kenny Guinn's proposed 6.5 percent tax on entertainment and admissions. "My position is, if we broaden the tax base, I think everyone should participate," Leslie says.

Guinn's tax would apply to cabarets, galleries, sporting events and shows, but the governor's tax policy task force stopped short of including brothels. Guinn's budget proposal was set to be released this week and estimates a state revenue shortfall of between $700 million and $1 billion.

Leslie says she's unclear on how the brothel tax would be applied. "I have no idea what is the fairest way," she says. "We don't want to make the girls dig into their pockets out of existing revenues."

But she says there's less resistance among legislators to a brothel tax than other forms of entertainment. "We're getting more resistance from golfers," she notes.

Even so, passing a brothel tax may not be easy. Brothels are a major contributor to rural county coffers, some of which have meager tax revenues. At least $500,000 a year goes to the counties.

And operating a brothel isn't cheap. George Flint, a lobbyist for the industry, says the tax may have an impact on operators in counties such as Storey, Nye and Lyon. The now-closed Mustang Ranch in Storey County reportedly paid $100,000 a year in license fees alone.

"A brothel license is from 200 to 1,000 times as much as a regular business license," he says.

Brothels also have to pay property and room taxes. One recent estimate in Storey County was that brothels pay up to 12 percent of the total county revenue.

And the 250 working girls employed in the houses cough up big time. "A secretary can get a work card for $50 a year," Flint says, "but our girls have to pay $250 every six months."

And that's not all. The women face a continuing battery of tests to ensure they're not a health threat to customers.

"Brothel regulations set forth minimum standards by state law," says Dr. Randall Todd, state epidemiologist. To get the job, they must pass four different health tests.

Then they're retested on a weekly and monthly basis, with the women covering the costs of those tests.

The impact of a state tax may vary, depending on the size of the brothel. Flint insists that not all brothels are doing well. Brothels in places such as White Pine and Mineral counties don't have many customers, while business is fairly brisk in counties closer to Reno and Las Vegas. Even with rates varying from $80 to $200 for one-time encounters, to special parties costing $1,000 or more, some rural brothels only survive on special events, such as hunting season.

"It all boils down to one thing. It's my job to show that we have to be pretty careful how we figure these things." Flint says. "It may get down to the place where they can't pay both county and state taxes."

But even in areas close to Las Vegas, the potential fiscal loss may not be that dramatic if some brothels do close.

"The economic impact is not truly significant," says Henry Neth, Nye County Commission chairman. Nye receives about $180,000 from its six brothels, which pays for the local ambulance service. But that's a drop in the bucket compared with the county's $24 million budget.

At the same time, Neth doubts a brothel tax would help state revenues much. "I don't see how it could possibly be significant to Nevada."

If taxes force some brothels to close, what happens to the customers? More will do what many are doing now: hire out-calls or go to so-called swinger clubs in Las Vegas and avoid a 120-mile roundtrip. After all, the tourist perception is that everything is legal in Vegas.

And the playing field is tilted in favor of illegal operators. Flint points to more than 100 pages of sex-oriented advertisements in the Las Vegas Yellow Pages, while legal brothels are prohibited from advertising in Clark County.

Metro Officer Jose Montoya sees the number of Vegas sex operations proliferating. He says operators are basically hiding behind fronts. "They try to disguise themselves as swinger places basically," he says.

Says Flint: "Fronts for prostitution can advertise to high heaven, while my clients are heavily restricted."

And while tourists are being subjected to fliers from sex joints on the Strip, brothels remain aloof from the nearby communities. "They're well below the radar screen," Neth says.

Sherer agrees. "We don't have smut magazines everywhere."

Todd, as a medical expert, see public health as the primary issue, since brothels require the use of condoms.

"Each county has its own set of brothel regulations, such as hepatitis B, which the state doesn't have. It's common elsewhere, but we're lucky if we see a couple of dozen cases a year. We haven't seen a case of syphilis in several years and we've never seen an HIV case. If you look at the STD [sexually transmitted disease] rates in those terms, it's incredibly low."

In contrast, Todd says Metro counted 300 street walkers who were HIV positive five years ago and 50 of those were repeat offenders.

Today, the situation is no better. Metro Lt. Terry Davis, who heads the vice unit, says since HIV testing began in 1988, 358 prostitutes have been identified as positive. Those who test positive face felony charges if they keep working the street. "They're getting some time, several years," Davis says.

Davis says his unit also tries to curb clubs that front for prostitution. "We've got a number of swingers clubs that we go out to address as time permits."

He warns that picking up hookers in Las Vegas poses a lot of risk. "You're playing Russian roulette. You might end up picking up one of those 358."

Flint, a Reno resident, says he's noticed an upswing in illegal activity since the Mustang Ranch closed a few miles outside of town. "Street prostitution in Reno is up dramatically," he says. "We have prostitutes we never saw when we had the Mustang open. The area has degenerated."

Taxing brothels may be difficult for some legislators, especially those associated with church groups, since the tax itself may force lawmakers to admit the brothels are legitimate. "The tax may give it credibility," Flint says.

Leslie differs, contending the industry is legal and deserves equal treatment. "It's already legitimate," she says.

Flint wonders how the issue will play out this legislative session. "It's really difficult for most people to objectively approach sex for sale," he says. "We don't get objective decisions."