Despite a frustrating ruling from the Supreme Court that kept the state and federal subsidies intact for the Affordable Care Act (aka Obamacare), there are still opportunities to chip away at some of the law’s more damaging provisions, including many of the taxes that were put in place to help offset some of the financial costs of Obamacare. Many of those taxes – which aren’t generating the promised revenue – shouldn’t have been created in the first place, and are now wreaking havoc on the economy.
Even though a full repeal of Obamacare may not be realistic, Congress does have the ability to remove components of Obamacare that have bipartisan opposition. One such component is the tanning tax. Currently, there is legislation in the House of Representatives sponsored by Rep. George Holding (R-N.C.) to repeal the tanning tax, H.R.2698, the “Tanning Tax Repeal Act of 2015.” The bill is a simple one-page piece of legislation that eliminates the tanning tax on indoor tanning salons. The bipartisan bill has 30 cosponsors, including Brad Ashford (D-Neb.) and Collin Peterson (D-Minn.).
The 10 percent tax on indoor tanning is the perfect example of a tax not generating the revenue promised. In 2010, the Joint Committee on Taxation (JCT) projected that the new tax would generate $1 billion between 2010-2014. The IRS reports that the tax only produced $86.3 million in fiscal year (FY) 2011, $91.5 million in FY 2012, and $92 million in both FY 2013 and FY 2014 – a total of only $362 million. With a difference of $600 million, those numbers are far from what was expected.
How did the Tanning Tax flop in such a spectacular way? The answer is basic economics: increasing excise taxes on a service leads to less use… and less use means less revenue generated. Unfortunately, this has also meant massive job losses in the industry, which harms small businesses and American workers. Over the last six years the indoor tanning industry has seen a loss of more than 80,000 jobs, and the number of indoor tanning establishments has dropped by more than 50 percent.
Those numbers are nothing to take lightly, especially when you consider that a major reason for the tax was to offset the costs of Obamacare. The dramatic impact on the industry means the JCT’s projections are essentially worthless. Just a few years in, Obamacare is already in the hole more than half a billion dollars on just one provision. In a bill filled with thousands of pages of new regulations, the fact that just one new tax (of more than twenty) has already fallen short doesn’t bode well for the program’s future.
Another area of bipartisan agreement is the elimination of the Medical Device Tax. The 2.3 percent tax on medical device importers and manufacturers has been a major point of contention for Democrats. The House overwhelmingly passed H.R. 160, the “Protect Medical Innovation Act of 2015,” in June, and is now waiting for the Senate to act. Democrats are in the uncomfortable position of either siding with constituents who have been feeling the pain from the tax on a key component of health care technology — or siding with President Obama, who has vowed to veto any such repeal measure. This highlights an intense and lengthy intraparty battle that has consumed Democrats on the Hill.
Congress must repeal these taxes because of the damage they have inflicted on these industries. Importantly, the tanning and the medical device industries aren’t the only losers here, though. Taxpayers are also on the hook because of the loss of projected revenue; as any politico knows, that shortfall will either have to be made up elsewhere, or borrowed from the general fund (adding to the deficit and debt).
When Obamacare was first passed, Sen. John McCain (R-Ariz.) elicited some laughs when he dubbed the Tanning Tax the “Snooki Tax,” in reference to the reality show Jersey Shore. The fact is that this tax (or any tax) is no laughing matter. It’s time for Congress to use some common sense and start to eliminate Obamacare provisions that are harming taxpayers and the economy.
Michi Iljazi is the Communications and Policy Manager for the Taxpayers Protection Alliance.