Harry Reid and prostitution: Are brothels bad for Nevada's economy?

Harry Reid and prostitution: Are brothels bad for Nevada's economy?

Harry Reid and prostitution: Are brothels bad for Nevada's economy?

Commentary about business and finance.
Feb. 24 2011 6:06 PM

Stimulus Spending

Harry Reid says prostitution is bad for Nevada's economy. Is he right?

Chicken Ranch Brothel in Nevada, 2004. Click image to expand.
Is legalized prostitution harming Nevada's economy?

They call Las Vegas "Sin City," but not everyone in Nevada is happy about it. Among them is Senate Majority Leader Harry Reid, who called for Nevada to outlaw brothels in a speech to the state legislature on Tuesday. What Reid added to the world's oldest debate, however, was a novel argument. Describing a meeting he had with a firm that would have opened a data center in the state—"a move that would have created desperately needed jobs"—Reid said the executives balked because prostitution remains legal in Nevada.

"Nevada needs to be known as the first place for innovation and investment—not as the last place where prostitution is still legal," he continued. "When the nation thinks about Nevada, it should think about the world's newest ideas and newest careers—not about its oldest profession."


Reid's comments sparked fireworks, with Sen. John Ensign (rating by the American Conservative Union: 96.0) coming out against the ban and one brothel owner telling the press, "Harry Reid will have to pry the cathouse keys from my cold dead hands." And while some of the arguments against prostitution are essentially unanswerable, Reid's position practically cries out for further analysis. As it turns out, it is very hard to prove that prostitution is bad for Nevada's economy.

For starters, legal prostitution, which occurs only within the highly regulated brothels, is not a big contributor to Nevada's economy one way or another, despite the outsize attention it gets. State law allows counties with fewer than 400,000 residents as of the last census to decide whether to allow houses of prostitution. Ten of Nevada's 17 counties do. Washoe County, home to Reno, is not one of them. Clark County, home to Vegas, could not even if it wanted to, as it is too big. The 24 brothels currently operating mostly reside in sparsely populated northern Nevada, around the I-80 corridor.

These businesses generally cater to tourists and truckers. "It is important symbolically, just because it adds to the 'What happens in Vegas stays in Vegas,' Sin City environment," says Barb Brents, a sociology professor at the University of Nevada-Las Vegas, and an expert on the sex trade. "But it's really a very small industry." Overall, Nevada's brothels employ about 1,000 people, total, and have combined revenues in the low tens of millions of dollars per year.

That pales in comparison with the state's other vice industries. Gambling provided the state with $9.7 billion in taxable revenue last year alone. The casinos draw in millions of tourists, supporting thousands of restaurants, bars, shops, and other businesses. Tobacco, alcohol, and various forms of live entertainment, salacious or not, generate tens of millions in taxes. And illegal prostitution also dwarfs legal prostitution, with thousands of prostitutes working in Vegas.


Still, where the brothels do exist, they help create jobs and boost local revenue. Individual counties and towns determine what taxes and fees to impose on the brothels. They commonly include quarterly business fees, work permit fees, and room and local taxes. The counties say the income is significant. One Lyon County official, for instance, told an NBC affiliate the county raises $300,000 to $500,000 per year from the local brothels. "We buy squad cars with that money," he noted. The income is also helpfully stable, Brents says: "A lot of these communities otherwise depend on mining, a business that can go up and down depending."

Geoff Arnold, the owner of two brothels and the head of the Nevada Brothel Owners' Association, cites the example of tiny Wells, Nev., to show brothels' importance in the economically depressed northern part of the state. "There are only 500 families in that town," he says. "The two brothels pay more in fees than every other business combined."

OK, so maybe brothels are important on a local level. But Reid's anecdote suggests something else: That the brothel business in Nevada, no matter how small, drives big business away. Is that true?

Certainly, there are some reports, like Reid's, of companies choosing not to set up shop next to painted-pink ranches, or even in the state at all. But those reports remain anecdotal, and conflicting. Las Vegas' mayor said the topic does not often come up when he speaks to businesses about moving to the state. Arnold says polls routinely show the majority of Nevadan business owners and residents support the status quo. "The Northern Nevada Development Authority says it has never heard of a business turn that part of Nevada down because of the brothels," he says, a point supported by the authority itself.


Brents also says she doubts the impact is big. "Throughout history, for the last 30 or 40 years, state officials have felt various degrees of embarrassment about the existence of the brothels," she says. "The casino industry has a love-hate relationship with them too." That's not because they tarnish the reputation of Vegas as a tourist destination—but because "it tarnishes the image of gaming as clean." Ultimately, she says, there is little to back Reid's assertion, true or not.

What is most remarkable about Reid's position may be that he expressed it at all. Many of Nevada's legislators and members of Congress leave the question of prostitution alone, deferring to local authorities when pressed for an opinion. Those who do speak out often do so for the other side: In 2009, state Sen. Bob Coffin, a Democrat who represents Las Vegas, proposed imposing a $5 charge per act, which would have raised about $2 million per year for the cash-strapped state. "I'd be happy to listen to arguments for legalization anytime," he said at the time. "In the meantime, I know we have to get some money from the world's oldest profession." (The bill, aimed at both illegal and legal prostitutes, failed in committee.) Las Vegas Mayor Oscar Goodman has also suggested changing state laws, even setting up a red-light district in Vegas.

There is, however, one kernel of truth in Reid's argument. Over the past 40 years, the state's economic growth has been driven by vice, with floods of tourists coming to gamble, drink, and partake in all-you-can-stand buffets. The recession has shown the fragility of an economy dependent on the business cycle: Allowing even more sin probably won't help the state much when the next downturn comes around. But maybe diversifying its economy will.

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