Stripper Tax Debated at Merriman

by StockJockey

Wednesday, March 05, 2008 - 1:13 pm

The remarkable rise in Rick’s Caberet Int’l (RICK-NASDAQ) was slowed last year by a “Pole Tax” in Texas that went into effect on January 1st....

December 21, 2007
In what some have dubbed the “pole tax,” the Lone Star State will require its 150 or so strip clubs to collect a $5-per-customer levy, with most of the proceeds going to help rape victims. The tax goes into effect on New Year’s Day.

Club owners and some of their customers say the money is going to a noble cause, but they argue that the tax infringes on their First Amendment right to freedom of expression, that it will drive some bars out of business and that it unfairly links their industry to sex crimes.

“We’ll be fine. I’ve already stopped advertising, and we’re raising our cover charges. But this is going to kill some of the smaller clubs,” said Dawn Rizos, who with her husband runs The Lodge, a Hemingway-inspired place that has exotic animal heads on the walls and is packed after Dallas Cowboys games at nearby Texas Stadium.

The strip clubs are suing to block the tax, which state officials estimate will raise more than $40 million a year, based on liquor sales figures. If accurate, the estimate suggests at least 8 million people a year go to Texas strip clubs to get a lap dance or watch women pole-dance in a G-string. FNC

Several other states are considering legislation of their own, but Merriman does not believe the surcharges proposed in Florida, Illinois and Pennsylvania will crimp attendance, and is out defending the stocks, with Rick’s bouncing nicely.

Rick’s roll-up strategy might not be terribly innovative, but shareholders have enjoyed the multiple expansion that the stock has garnered over this decade.

Merriman is apparently arguing that this might spur attendance as cover charges are funneled to charities, as if you needed another reason to go.

Texas Adds ‘Pole Tax’ to Strip Clubs for $5-Per-Customer Levy
Fox
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