Death and Tanning Taxes

Readers with a long memory will recall I blogged about the “tanning tax” provision in ObamaCare that puts an excise tax on establishments that sell tanning services (Alan Viard offered helpful comments here and here). Tim Taylor writes that things haven’t quite worked out the way the administration hoped. Apparently many fewer establishments pay the tax than predicted and it is bringing in far less revenue than originally estimated. Taylor’s whole post is worth reading but this point is especially worthwhile:

When the federal government starts trying to collect a small amounts of money from many small businesses, it’s like an elephant standing on a ice rink trying to pick up peanuts. Sure, you get some peanuts. But the contortions and the effort seem hardly worth it. As you consider what the IRS has been going through to collect this tax, and the costs on businesses of record-keeping and dealing with the tax, remember that the $200 million that Congress hoped to raise with this tax represents about 1/20 of 1% of the $438 billion in total revenue-raisers in the health care reform bill.

At the end of the day, the tanning tax probably collects more in revenue than the costs to the government and business of putting the tax into place and collecting it. But surely, the IRS resources could be better allocated (more audits on potentially large targets?). Indeed, given how little revenue the tanning tax corrects, it’s probably misguided to think of it primarily as “tax” policy. It’s some anonymous Congressman or staffer who doesn’t like tanning booths sticking a tiny provision that almost no one hears about into an enormous bill. It’s the sort of piddly annoying oddball regulation that gives the rest of government regulation a bad name.


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