OpEd: Is The 'Tanning Tax' Screwing Up Obamacare Savings?

Image: Barack Obama
President Barack Obama speaks in the Rose Garden of the White House on Thursday, June 25 in Washington after the Supreme Court upheld the subsidies for customers in states that do not operate their own exchanges under the Affordable Care Act. Carolyn Kaster / AP

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By Jason Johnson
Pedro Rojas holds a sign directing people to an insurance company where they can sign up for the Affordable Care Act, also known as Obamacare, before the February 15th deadline on February 5, 2015 in Miami, Florida.Joe Raedle / Getty Images

Whenever someone tells you that XYZ purchase will “pay for itself” that’s usually a sign you’re going to get ripped off. Whether it’s a an Apple Watch that pays for itself in saved time, or a car that “pays for itself” in gas mileage, there’s always a catch, and when the government tells us a program will pay for itself the smart move is to reach for your wallet.

The American people were repeatedly promised by the Bush administration that the War in Iraq would “pay for itself” with cheap oil and gas flowing out of every crevice of Fallujah, which turned out to be a complete lie. So it should come as no surprise that the current program sold under the same theme is also running into the harsh reality of economics. The Affordable Care Act may not be able to pay for itself, and if you want to know why just look into the nearest tanning salon you can find.

The two keys to selling the Affordable Care Act were that 1) It covers more Americans and 2) It lowers the cost of healthcare. Part one is an unequivocal success, more people are covered in more places than before the ACA was passed. But part two is a bit less clear. Expanding medical coverage to the poor, requiring more companies to provide coverage is all supposed to pay for itself in terms of lowering the inflation rate of medical costs in America. Additionally, taxes on various services are supposed to make up any additional costs to cover this newfound coverage, but so far the taxes are falling pretty short.

A good example of this shortfall is the Tanning Tax. The “Tanning Tax” according to the Joint Congressional Committee on Taxation, is a 10 percent tax placed on indoor tanning businesses that is supposed to raise almost 2.7 billion in revenue from 2010 to 2019, helping offset the cost of the ACA (which right now looks to be about $940 billion).

Who on earth thought that indoor tanning salons would bring in that much revenue? (But then again, when you look at a committee made up of Members of Congress from the pale overcast states of Wisconsin, Michigan, New York, Oregon and Idaho, perhaps their perception of how much Americans need to tan is a little skewed.)

The United States can’t simultaneously rely on the tanning businesses for taxes and tax them out of existence. Right now Congress is literally killing the goose that lays the golden tan.

All regional biases aside, the committee’s assumptions just aren’t panning out. As of fiscal year 2014 the tan tax has only brought in about $367 million, far below the $1 billion estimate that the Joint Committee predicted in order to keep the Affordable Care Act from running into the red. But the situation is even worse than the current numbers predict.

Many employers have already begun making changes in their healthcare offerings in an effort to dodge the potential taxes that will kick in under the ACA in the coming years. In some cases this is a good thing, as employers spend more money on wellness programs, preventive care and long term care. Unfortunately, in some cases health care reform has led businesses to simply shut down entirely or scale back, which digs into the tax base the policy desperately needs to survive.

The number of full time tanning salons have dropped in the United States from about 18,000 to 10,000 since around 2009, in part due to the recession and in part due to the imposition of the tanning tax.

Doctors groups and patients breathed a sigh of relief on Thursday, June 25 when the Supreme Court upheld one of the most important provisions of Obamacare: the federal subsidies.Mark Wilson / Getty Images

The United States can’t simultaneously rely on the tanning businesses for taxes and tax them out of existence. Right now Congress is literally killing the goose that lays the golden tan.

Overall the Affordable Care Act is a flawed but relatively positive facet of federal policy, but its long term viability is really in question. The tan tax is just one example, but there are dozens of taxes the ACA depends upon that may not prove to provide the kind of long term revenue consistently needed to keep the law going without making some drastic changes to the U.S. tax code.

Unfortunately, bipartisan solutions have been drowned out by the noise of presidential politics.

Most Republicans just want to repeal the entire ACA which is both impractical and dangerous for the American economy, and most Democrats don’t want to touch President Obama’s crowning legislative achievement.

However, now is the time for political leaders to think about the nation’s health and perhaps look at ACA taxes piece by piece to figure out what works and what doesn’t. I’m pretty sure if there’s anyone who would be unhappy with taxes on tanning salons it’d be John Boehner, and with a little help from some Democrats in the Senate I’m sure they could find a solution that would actually stick.