The Bo-tax vs. the tanning tax: Tanning revenue pales in comparison
by AccountingWEB on
Congress has a gigantic new bill to pay for. If it becomes law, the health plan is projected to cost taxpayers a whopping $849 billion over the next decade according to a Congressional Budget Office estimate. That's why they are shining their searchlight into every corner, looking for places where they can raise taxes to pay the price. A few months ago, Congress was poised to add a five percent tax on Botox injections (called by some, the Bo-tax) which was projected to raise $5.8 billion over ten years. But thanks to hard lobbying by cosmetic surgeons and others, the Botox industry has dodged a bullet, and in the opinion of some, thrown a much less powerful industry under the bus.
At the urging of those who opposed the Bo-tax, Congress is now zeroing in on the indoor tanning services as a source of new revenue. Over the same ten-year period, Congress estimates that by slapping a 10 percent tax on all non-therapeutic tanning services they will raise $2.7 billion. That's twice the tax rate they were planning to add to Botox procedures, yet it will likely yield less than half the total revenue. So why the change? Those in the cosmetic surgery industry say they offered up the tanning industry because they want to discourage what they call a damaging (though legal) behavior -– indoor tanning. The tanning industry says… it was all about clout.
The Case Against Bo-tax
Doctors and industry groups say that the client base for anti-aging injections consists mostly of females. Therefore, they say, taxing Botox is discriminatory against women. To fight the tax, Allergan, the makers of Botox, help finance a Web site called Stopcosmetictax.org which lists various reasons why Congress should not target Botox, including:
- The tax discriminates predominantly against women
- The tax mistakenly puts cosmetic medical procedures in the same category as unhealthy habits such as cigarettes and alcohol.
Doctors and industry groups say that because of the preponderance of female clients, a Bo-tax would discriminate against women. Stopcosmetictax.org stated on its site that it would be "unfair and insulting" to women to add a tax that suggests getting Botox injections is bad behavior that must be discouraged by Congress.
The Web site warns visitors that if Botox is taxed, other cosmetic procedures may follow:
The tax could apply to a wide-range of treatments and procedures designed to help enhance a patient's self-confidence and aid in comprehensive self-improvement, including botulinum toxin and dermal filler injections, laser hair removal, microdermabrasion, dental caps and implants, teeth whitening… the list goes on and on.
To further deflect the attention of the IRS, the president of the American Academy of Dermatology, Dr. David Pariser, contacted the offices of senators to suggest dropping the Bo-tax, and instead, taxing indoor tanning.
"We made the case this will reduce health care costs by hopefully reducing skin cancer in the future — that's the point — and also raise a little revenue now," said Pariser.
Many who support the tax on tanning beds don't have an ax to grind when it comes to the Bo-tax. Their focus is not pro-Botox but anti-indoor tanning, which they say is linked to skin cancer, especially in those younger than age 30. June Robinson, a clinical professor of dermatology at the Feinberg School of Medicine at Northwestern University points to the way the federal government has engaged in a type of behavior modification before, by raising taxes on other products.
"In the past, taxes on addictive substances like tobacco and alcohol have decreased usage," said Robinson. "That's the dream." In praising Harry Reid for his efforts to push through the health care bill and pay for it by taxing tanning salons, Robinson said, "I feel like sending a dozen red roses to a certain senator from the great state of Nevada."
What does the tanning industry say about the proposed federal tax?
The argument that Botox procedures unfairly targets women could be equally applied to tanning salons, says Kathe Ray. Ray claims that not only are most tanning salon customers female, but the majority of owners are as well. Ray is the moderator of TanToday.com, a forum for salon owners, and the owner of a Detroit salon.
"They are still discriminating against women," she told reporters. "It's just changed industries. It hasn't changed the end customer."
Joseph Levy, vice president of the Smart Tan Network pointed out in a statement to the press that dermatologists use tanning equipment to treat acne and eczema and other skin conditions. They call it "phototherapy," charge about $100 per visit, and will not be subject to the tanning tax, according to Smart Tan. Tanning salons, he says do the same thing for much less.
Smart Tan also offers these statistics and projections:
- 67 % of salon owners are women
- The 10% tax could lead to 1,000 salon closures and the loss of more than 9,000 jobs in 2010 alone. An interactive poll on the Smart Tan Web site asks if a 10% tax would force salon owners to lay off employees or close their businesses. Roughly three quarters of respondents answered "yes."
- An estimated 1.5 million salon visitors each year use indoor tanning to informally treat the same conditions that dermatologists treat in their offices, but for only a few dollars per visit. Smart Tan estimates that up to 70% of salon visitors are referred to tanning salons by their doctors.
"We are the convenient scapegoats for the cosmetic surgery industry," chief executive of Hollywood Tans Group, Lewis Shender, told The New York Times. He added that the tanning industry is mostly made up of mom-and-pop enterprises, without the "resources or influence" that doctors have. That, he believes, is why the cosmetic surgery industry was able to offer them up as a substitute that would be unable to effectively protest. Shender's remarks suggest that this is a tax which will primarily affect the middle class.
Dan Humiston, president of the Indoor Tanning Association and owner of 34 salons in New York told reporters at the Denver Post that, unlike rising costs in other segments of the economy, salon owners will not be able to raise prices to cover the increase.
"The idea that we are going to pass this tax on to our customers, it's untenable. I do not see that happening."
Like Levy, Humiston also believes that his industry was chosen because they were an easy target. "Out of all industries you could chose, why the tanning industry? Because we're so wealthy? Because we're making so much money? From customers who pay $6 for a tan? No, it's because we're not going to fight back."
Clout or no clout, Levy is urging tanning salon owners to fight. Anyone involved in tanning, as a salon owner, a customer, or in any other capacity, should contact his or her elected officials and protest, he says. He points out that taxing indoor tanners will bring in only 40 percent to 50 percent of what Congress is hoping for. The American Society for Aesthetic Plastic Surgery says Botox injections are the fastest growing dermatology procedure in the United States, which explains why the projected revenue from the Bo-Tax was more than double what Congress can expect from the tanning tax. Meanwhile, tanning salons have had to lower their prices to keep customers coming in during the slow economy. Levy estimates that higher taxes will lead to job losses across the country.
One salon owner voiced an opinion that many in the industry are probably feeling, by posting a note to the President on the bulletin board of tantoday.com."Thanks Obama for helping a family of 4 trying to get on track and plan for our kids' future in a struggling economy after five years of personal financial struggles. Please no more help for us small business owners, I can't afford it!"