The Vanity Tax

The trouble with the government's new tax on indoor tanning services

Last December, on Christmas Eve, any Republicans in the Senate who had actually read the latest version of the healthcare reform bill they were voting on must have thanked the Democrats for one last-minute gift: A 10 percent tax on indoor tanning services. Any GOP elf charged with manufacturing ill will toward liberal overreach, President Obama, and the specter of government tanning panels would have been hard-pressed to come up with a better ploy than this half-baked sin tax. Impotent and paternalistic at the same time, it shines approximately 48 super-efficient reflector tubes of 100-watt artificial sunlight on the way the government's increasing control over healthcare inevitably erodes individual freedom. On July 1st it goes into effect.

The tanning tax is the brainchild of the American Academy of Dermatology Association (AADA). The AADA pitched it to the Senate as an alternative to a tax on cosmetic procedures that a U.S. Treasury Department official had reportedly proposed to help cover the costs of healthcare reform. This proposed 5 percent Botax, as it came to be called, was itself a terrible idea, essentially turning wrinkle removal and breast enhancement into finable infractions and making individuals willing to bear the full cost of their vanity subsidize someone else's love for donuts, bourbon, and skydiving. Dermatologists, boob sculptors, and their powerful lobbying forces rightly objected to the proposal and got it liposucted from the bill.

At the same time, the AADA argued on behalf of a tax that would penalize people who enjoy baking themselves to a glamorous orange crisp in coffin-like radiation chambers. The AADA has been warning about the dangers of tanning beds since the 1980s, and it saw the government's need for revenue as an opportunity to put more teeth into its advocacy efforts. "A tax on indoor tanning services would serve as a signal from the federal government to everyone, especially young people, that indoor tanning is dangerous and should be avoided," said AADA president David Pariser in a December press release. "In addition to generating revenue to help offset the cost of health system reform, a federal tax on indoor tanning helps reduce health costs by discouraging indoor tanning and thereby reducing the future costs of treating skin cancers."

Joseph Levy, vice president of the International Smart Tan Network, a tanning industry trade association, predicted to MoneyCNN.com that the tax may lead to the closure of 1000 salons and the loss of 9000 jobs. John Overstreet, executive director of the Indoor Tanning Association, is also anticipating dark days ahead for the industry as a result of the tax. On TanTalk.com, a message-board where tanning salon owners exchange information about their businesses, the mood is sunnier. "We maybe had 2 people out of a few thousand say they would leave because of the tax," said one. "I have posted a sign that states the 10% tax, blah, blah, blah. We have been getting with each [electronic funds transfer] client and telling them about the increase. No issues to speak of," said another.

Apparently the deterrent value of a 10 percent tax on a service that sells for as little as $5 is negligible. But if the tax is too incidental to alter consumer behavior, it will still penalize tanning salon customers in a pretty arbitrary way. While anti-tanning advocates point to studies that link tanning salon patronage to higher incidence of melanoma, there are plenty of other ways to get skin cancer too, most of which simply involve staying out in the sun too long without adequate protection. In the case of melanoma, incidence rates started rising in the U.S. long before the indoor tanning industry established itself here in the early 1980s.

According to a 2004 survey conducted by Wolff System Technology, a manufacturer of tanning beds, more than 70 percent of tanning salon customers are women. According to American Cancer Society estimates, 55 percent of the individuals who contracted melanoma in 2008 and 64 percent of those who died from it that year were men. In addition, the American Melanoma Foundation's 2009 fact sheet reports that incidence of melanoma is increasing more rapidly in men over 65 (a demographic not particularly associated with tanning salons) than in young white women (tanning salons' primary clientele).

So why not also levy a tanning tax against old bald guys who play a lot of golf but refuse to wear hats? The Senate targeted the tanning salon industry simply because it was expedient to do so. It had revenue that could be easily taxed, and unlike the wealthier, better-organized cosmetic surgery industry, it lacked the power to effectively block such legislation.

According to the Joint Commission on Taxation, the tanning tax is expected to generation $2.7 billion over the next decade, or $270 million a year. Meanwhile, a 2004 study the AADA commissioned found that the cost of treating melanoma that year was $291 million. Thus, the revenues collected from tanning salon customers over the next 10 years could theoretically supply approximately 90 percent of the money we use to treat melanoma during that time.

But how many indoor tanners will actually contract the disease in any given year? According to America Cancer Society estimates, 68,720 people were diagnosed with melanoma in 2009. Meanwhile, a 2010 study conducted by researchers at the University of Minnesota found that of the 1167 people with melanoma it surveyed, 62.9 percent had used an indoor tanning device at least once in their lives. Apply these percentages to the American Cancer Society numbers, and it suggests that of the 68,720 people who developed melanoma in 2009, 43,224 of them had used an indoor tanning device at least once in their lives.

Exposure to UV radiation doesn't instantly lead to melanoma; the lag time is generally thought to last between 10 and 30 years. Thus, the majority of people who got it in 2009 were probably exposed to it in the late 1980s. According to a 1988 article in the Omaha World-Herald, there were approximately 18,000 tanning salons and 25 million annual customers at that time. (Today, the International Tanning Association estimates that there are 25,000 salons and 30 million customers.) What these numbers suggest is that, in any given year, the odds that an indoor tanner will contract melanoma are approximately 43,224 out of 25 million, or 1 in 578. For many potential customers, this is probably a grim enough ratio to convince themselves that, yes, indeed, spray-on tans look totally realistic! Expressed another way, however, what it suggests is that, in any given year, 99.998 percent of the people who patronize indoor tanning salons will not get melanoma.

xxxNonetheless, 100 percent now have to pay a tax because of their patronage. Welcome to the new age of healthcare. In the old system, insurers exercised biases against people with pre-existing conditions. In the new one, the biases are being transferred to people with pre-existing behaviors–especially when those behaviors are easily taxable.

The government doesn't have a lock on this approach. On the same day that the tanning tax goes into effect, Newton Medical Center, a non-profit hospital in Kansas, will start charging its employees who smoke cigarettes a $70-per-month "tobacco-user surcharge" on their health insurance premiums.

But the government has the ability to exercise its power more broadly than any other institution. If you're a Newton employee and you don't like this new surcharge, you can quit your job and look for another one. If you're an indoor tanner and you can't afford to buy your own private tanning bed, you're out of luck. Every time you go to a salon from now on, you have to pay a tax. The big question, of course, is how far the government might extend such measures. While the tanning tax isn't likely to alter consumer behavior much in its current form, it does serve as a kind of intellectual base tan, helping to acclimate us to the idea that the government's right to coercively modify our lifestyles is expanding as it takes a larger role in healthcare. Obviously, there are many activities that aren't 100 percent safe, and are thus now as legitimately taxable as indoor tanning is. Indeed, best to enjoy your tax-free alien hunting while you can: At the same time the Senate was entertaining a cosmetic surgery tax, it was, according to a Fox News producer, contemplating a tax on video games to discourage sedentary behavior.

Contributing Editor Greg Beato is a writer living in San Francisco. Read his Reason archive here.