Taxes on health procedures are not netting nearly the income governments had hoped for. Image: Flickr / Zaldagyk / CC-BY-SA

As a part of the 2010 overhaul of health care, a tax on indoor tanning was implemented. New Jersey also implemented a tax on elective cosmetic procedures. Neither of these taxes, however, are returning the revenue that lawmakers expected.

Indoor tanning tax

The 10 percent tax on indoor tanning went into effect in July of 2010. The tax was modeled on the taxes on cigarettes and tobacco products that are used to discourage their use.

Tanning has been shown to cause an increase in skin cancer, which has a very high cost to treat. Salon owners, however, are allowed to pay this tax without passing the cost on to customers, which negates the discouraging effect of the tax. Initial estimates put expected income from the tax at $100 million in the first half of the fiscal year; actual income was about $36.6 million.

New Jersey repealing the Botax

Around 2004, New Jersey lawmakers created a first-in-the-nation Botax. The 6 percent tax on the receipts from cosmetic procedures was intended as a way to help fund low-income health care in the state. The tax was expected to bring in $24 million each year. In the last few years, however, the tax has brought in no more than $12 million in a year. Now lawmakers have opted to phase out the tax, reducing to nothing in July of 2013.

A funding quandary

Both the indoor tanning tax and the cosmetic procedure tax were intended to raise money on elective procedures. Not bringing in the money that was expected, however, means that these taxes may not be considered an option for future funding for health care. This is especially important in the future, as government-sponsored health insurance programs will have to wrestle with how to dis-incentivise actions that have a negative impact on individual health, while incentivising actions that improve health.



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