The Tanning Tax: Two Weeks In

On July 1, a new federal 10% excise tax on indoor tanning went into effect. My colleague Natasha Altamirano explained why the tax is not sound tax policy:

The tanning industry is just the latest victim of government paternalism, putting it in the same category as cigarettes, alcohol, gambling, sodas, trans fats, junk food and other targets of so-called "sin taxes."

Desperate for revenue and lacking the guts to curtail big special-interest tax breaks such as the employer-provided health insurance exclusion or the mortgage interest deduction, congressional leaders and the president have singled out a politically vulnerable target. Kind of like a pride of lions singling out the weakest wildebeest.[…]

Jokes aside, the tax will hurt small salons — 18,000 nationwide — and most of these small businesses are owned by women, according to a trade association.

The association also notes that health clubs that offer indoor tanning services are exempt from the tax, which underscores one of the main problems about sin taxes: that government shouldn't be in the business of picking marketplace winners and losers.

Sound tax policy dictates that all industries should be treated equally under the tax code rather than using the Internal Revenue Service to favor certain goods and behaviors and punish others.

The tax is in a long line of excise taxes on "luxuries" (the telephone excise tax and automobile excise taxes started out that way too). My local indoor tanning salon (I've yet to use it) says its sales are down 20 to 30 percent. The industry argues that moderate use of indoor tanning can be beneficial, so a targeted tax designed to cripple their industry is not productive. I don't really understand the reverse racism argument, though.

It certainly a weird issue that creates political bedfellows between Jersey Shore star Snooki and cancer-survivor John McCain.