SACRAMENTO, California (Reuters) - A California bill proposing a 25 percent tax on revenues from adult entertainment would do little to ease the state’s budget shortfall and would cost the state money by encouraging its pornography industry to move, opponents said on Monday as lawmakers reviewed the bill.

The legislation would especially hurt the economy of the San Fernando Valley, the Hollywood of pornographic filmmaking, said opponents, who included several dancers and other adult entertainment performers and employees at a hearing on the bill in the state capital, Sacramento.

“This will decimate the San Fernando Valley,” Larry Kaplan, executive director of the California branch of the Association of Club Executives, a group representing adult entertainment clubs, told Reuters.

“We estimate it would take $3.5 billion out of California,” Kaplan added, referring to the economic activity the state could lose if it were to tax strip-club performances, porn-shop sales and adult Web site revenues at a 25 percent rate.

Matt Gray, a lobbyist for the state’s adult entertainment industry, echoed the familiar refrain of mainstream small and big businesses directed at lawmakers who propose raising business taxes: “It’s an unfriendly business climate here.”

If porn-film production costs are pushed up, California’s adult movie-makers will have even more reason to shoot movies elsewhere, Gray said, adding that Budapest is giving the San Fernando Valley, north of Los Angeles, a run for porn-film production money.

“It’s actually cheaper to fly everyone to Budapest to do their shoots there and to fly them back,” Gray said.

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Assemblyman Charles Calderon had proposed his bill to help raise revenues for the cash-strapped state. Gov. Arnold Schwarzenegger has forecast a $20 billion budget shortfall.

But additional tax revenues from the adult entertainment activity would also help defray social costs associated with it, including crime, drug abuse and sexually transmitted diseases, according to Calderon, the Democratic chairman of the chamber’s committee on revenues and taxation.

“This tax would cover the gamut of adult entertainment,” he told fellow lawmakers. His bill would tax production, distribution, retail sales, Internet downloads and performances of adult entertainment.

“Every second, $3,000 is being spent on adult entertainment,” Calderon said. “Every 39 minutes, a new adult video is being made in the United States.”

Former porn actress Shelley Lubben spoke in favor of Calderon’s bill, detailing to lawmakers her history of prostitution, drug abuse and sexually transmitted disease while in the industry.

“I really don’t think the state understands the problem,” Lubben said. “It literally took me eight years to recover.”