Time To Ditch The Obamacare Tanning Tax
Americans have now had ample time to become acquainted with Obamacare’s numerous destructive provisions. Some of its failures, like the expensive and inoperable exchange websites, have been quite public. Others have gone largely unnoticed. One such example is the hefty 10 percent tax on indoor tanning sessions, which has proven over four years to be a decisive policy failure.
One of over a dozen new taxes and tax hikes included to pay for the bloated health care law, the tanning tax has failed to produce anything near its projected revenues. Collected receipts are less than half of the $200 million projected to be raised annually by this stage, and are unlikely to rise to the eventual $300 million peak foreseen by government bean counters. This shouldn’t come as much surprise given the simple economic truth that when you tax something, there will be less of it.
In that sense the tax has produced exactly what government accountants should have expected – fewer tanning salons. An estimated 8,000 professional tanning businesses have closed shop since the tax was implemented, costing approximately 64,000 workers their jobs. That’s a tough pill to swallow in a weak job market.
And in a twist of political irony for a White House that has capitalized heavily on rhetoric bemoaning a so-called war on women, pain from the tanning tax has not been gender neutral. A full 70 percent of professional tanning businesses are owned by women, so it is women who have suffered the heaviest economic consequences of the tax.
Politicians have had ample opportunity to learn these lessons. When the first President Bush broke his pledge not to raise taxes by agreeing to new luxury taxes on expensive items like yachts, the government predicted over $30 million would be collected. Only about half of that ever materialized because people changed their behavior in light of the new taxes. A study by the Joint Economic Committee determined the tax destroyed almost 10,000 jobs and cost the government more money in unemployment benefits and lost income tax revenues than it collected.
The tanning tax is also emblematic of how not to write tax policy. It was thrown in to help pay for the healthcare law at the last minute and without debate, but taxes an activity with very little relation to the main thrust of the law. It also applied to a narrow base that was sure to shrink due to the tax’s impact on consumer prices, resulting in limited and diminishing revenues. In fact, the tax was originally slated to be placed on elective cosmetic surgery, but the American Medical Association is more politically connected than small tanning salon owners. As such, the tax not only added yet another government distortion to the market, but it also reinforced the sleazy Washington practice of protecting major donors at the expense of the little guy.
It’s not as if the tanning tax is unique. Obamacare is loaded with bad ideas that will require decades of untangling, including taxes on medical device manufacturers, innovator drug companies, charitable hospitals, and even patients with high medical costs. But the tanning tax does provide an excellent case study into what happens when political optics and expediency are allowed to trump sound policymaking.
While the courts grapple with Obamacare’s many less than legal provisions, there’s nothing stopping a more sober Congress from returning to the issue and repealing items like the tanning tax that have proven to be failures. Ongoing efforts at tax reform, meanwhile, must include removal of such capricious and unproductive taxes. It’s time for Washington to recognize that not every activity under the sun – or the tanning bed – needs to be taxed.
Andrew F. Quinlan is the co-founder and president of the Center for Freedom and Prosperity (@cfandp).