Porn Tax

In what seems like an event made especially for this blog, or what Oscar Wilde would call life imitating art, California is considering a tax on pornography to deal with its fiscal problems. (Insert "sin tax" jokes here). Seriously, this is a quote that deserves careful analysis:

However, many economists believe that pornography is an industry with inelastic demand -- meaning market conditions typically don't affect consumers' desire for the product. In other words, it is believed that most porn consumers would continue to buy regardless of how much it cost.

I agree that "pornographic materials" have inelastic demand, but I don't agree that the for-pay products produced by the pornographic industry are inelastic. With so many free porn online, such a tax would likely (a) cause the price of products produced by legal corporations to rise and (b) cause a decrease in the purchasing of pornographic materials with (c) a substitution towards more free materials online. In effect, whether this would effectively reduce aggregate consumption of pornography is likely untrue, but whether it would effectively reduce purchases is likely true. In such a case, the total tax revenue California could expect to receive from the tax is therefore much lower than one would expect if we modeled demand as inelastic. There is of course also the possibility that the industry would leave California and migrate to another state where there isn't a tax.

The fixed costs of production are so low in pornography that I can easily see that kind of thing happening. As much as I hate to admit, I'm reluctant to say that this is a good idea. Of course, I would personally prefer to see aggregate pornographic consumption to fall, but at this point, with the Internet what it is, I doubt supply-side interdictions will have any real effect.