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Lucky That Longshoremen Get Tan Naturally

December 21st, 2009 . by economistmom

longshoremen-union-obama-button

…otherwise, Senator Reid’s “manager’s amendment” to the health care reform bill would be a “wash” for them. A snow-day CQ story by Richard Rubin exposed the sillier side of how a health care reform bill is made (emphasis added):

The amendment also would replace a proposed 5 percent excise tax on cosmetic surgery with a 10 percent excise tax on indoor tanning salons. The new tax raises $2.7 billion, instead of the $5.8 billion raised by the cosmetic-surgery tax, or “Bo-tax,” as it was known.

“Basically, the docs, to get their support, didn’t want Bo-tax, but they’re fine with tanning,” said Baucus, who specifically mentioned the support of the American Medical Association. “Tanning’s a bad practice. It causes cancer. Tanning beds should be taxed.”…

The amendment also slightly changes the proposed excise tax on high-cost health insurance plans. Longshoremen would be specifically added to the list of high-risk professions that get a higher threshold before the 40 percent tax takes effect.

This Dow-Jones story by Martin Vaughan offers an “interesting” (ok, silly and ridiculous) justification for removing the cosmetic surgery tax and describes the “interesting” (ok, silly and ridiculous) new debate it’s spawned between the plastic surgery lobby and the indoor tanning lobby (emphasis added):

Senate leaders dropped from the bill a 5% tax on all elective cosmetic surgeries that had been in an earlier version. Allergan Inc. (AGN), along with Medicis Pharmaceutical Corp. (MRX), and other firms lobbied against that tax, arguing that it was unfair to working women

The indoor tanning industry has been fighting its own public relations battle as the U.S. Food and Drug Administration in recent weeks has sharpened its warnings about the risks of ultraviolet rays from indoor tanning beds. The tanning excise tax would raise $2.7 billion over 10 years for federal coffers.

John Overstreet, executive director of the Indoor Tanning Association, lashed out at plastic surgeons in a statement.

“It is not surprising that one primarily cosmetic business is trying to throw another under the bus by transferring a tax from rich doctors and their wealthy customers to struggling small businesses,” Overstreet said. “The irony is that ultraviolet light at least has proven health benefits where botox treatments have none.”

OK, let’s just call it the quest for the perfect “you look maaa-velous” (and obviously have too much discretionary income but not enough lobbying influence) tax.

And I do not normally find myself agreeing with the Wall Street Journal editorial page (I’m always calling for taxes to be increased after all), but when even they find themselves complaining about tax preferences that are based on political lobbying power rather than economic merit, I have to say they’re right:

Start with the special tax carve-outs included in the “manager’s amendment” that Harry Reid dropped Saturday morning. White House budget director Peter Orszag has claimed that the bill’s 40% excise tax on high-cost insurance plans is key to reducing health costs. Yet the Senate Majority Leader’s new version specifically exempts “individuals whose primary work is longshore work.” That would be the longshoremen’s union, which has negotiated very costly insurance benefits. The well-connected dock workers join other union interests such as miners, electrical linemen, EMTs, construction workers, some farmers, fishermen, foresters, early retirees and others who are absolved from this tax.

In other words, controlling insurance costs is enormously important, unless your very costly insurance is provided by an important Democratic constituency.

The Reid bill also gives a pass on the excise tax to the 17 states with the highest health costs. This provision applied to only 10 states in a prior version, but other Senators made a fuss. So controlling health costs is enormously important, except in the places where health costs need the most control.

If only the WSJ editorial page (and those who normally agree with them) would see how their logic might apply to the large tax preferences (really, “tax entitlements”) granted to the oil and gas industry/lobby, or to the farm industry/lobby, or to seniors (who don’t even need lobbyists but still have a pretty great one in the AARP).

I’ll have more to say on the not-so-silly aspects of tax policy in the House and Senate health reform bills later this week.

6 Responses to “Lucky That Longshoremen Get Tan Naturally”

  1. comment number 1 by: Brooks

    If only the WSJ editorial page (and those who normally agree with them) would see how their logic might apply to the large tax preferences (really, “tax entitlements”) granted to the oil and gas industry/lobby, or to the farm industry/lobby, or to seniors (who don’t even need lobbyists but still have a pretty great one in the AARP).

    Indeed, imagine if, instead of handing out all those “tax exemptions”, we were all talking about handing out “subsidies” — in other words: same sh*t, different name. Even though it would be essentially the same thing, I have a funny feeling conservatives in Congress and among the public would all of a sudden find them quite objectionable.

  2. comment number 2 by: Jeff

    ILWU longshoreman receive some of the best health benefits by any blue collar worker in America. But it has come at a cost. Along the way they have given up other items to maintain their great benefits. Why should they be taxed or their provider be taxed just because they are fortunate to have great benefits. I see no problem with the longshoreman trying to fight to avoid this tax. Any other worker who had what they did would do the same.

  3. comment number 3 by: Jim Glass

    ILWU longshoreman receive some of the best health benefits by any blue collar worker in America. But it has come at a cost. Along the way they have given up other items to maintain their great benefits.

    Right, other items that would have been taxable as compensation, if not rolled into tax-free medical benefits. Which is exactly why the strongest unions demand so much in medical benefits: it converts taxable compensation into tax-free compensation.

    Why should they be taxed or their provider be taxed just because they are fortunate to have great benefits.

    Why should those who get more be taxed more than others?

    Now let’s apply this question to the rest of the progressive agenda.

    I see no problem with the longshoreman trying to fight to avoid this tax. Any other worker who had what they did would do the same.

    Of course. It’s all an exercise of “I keep mine, you pay the tax bill”, and those with the most lobbying power with the Democrats win.

    If the Botoxers versus the Tanners doesn’t prove that, what does? “Reform!”

  4. comment number 4 by: Jim Glass

    So our Congressional leaders don’t have the strength of will to stick with a 5% tax on elective cosmetic surgery — but still promise us that fully 40% of the entire cost of the reform will be covered by their cutting Medicare.

    We all believe that, right?

    Megan McArdle has an interesting post on how with this reform bill the Democrats have effectively gutted the CBO scoring process.

  5. comment number 5 by: SteveinCH

    Once again, I’m forced to point out that this is all a question of how you baseline. Let’s say for example that the government decided that I should pay 10% of my income and Brooks should pay 5%. That could be accomplished by charging me 10 and Brooks 5 or but charging us both 10 and rebating 5 to Brooks. It works out the same either way.

    The reason I point is out is that Diane by arguing against certain industries, you should be arguing against the entire tax code. Married couples, people with children, people with capital gains, etc. The tax code is rife with silly exceptions to the rules. I have no problem with arguing there shouldn’t be exceptions at all, but to pick out a few is unfair.

    I bet if you went to the editorial board of the WSJ with a “no exception” tax plan, they’d probably endorse it. They prefer to gore different oxen than you but let’s see who jumps first to gore them all. Count me in by the way if we really gored them all…flat tax anyone?

  6. comment number 6 by: SteveinCH

    Jeff,

    Benefits are income, whether we choose to look at them that way or not. Is it “fair” in some cosmic sense for Congress to change the rules after the fact, probably not. Unfortunately, that’s what Congress does. It’s why businesses and unions spend so much money lobbying. Since Congress is deemed to have unfettered power to change the rules at any time, why shouldn’t people fight to get the rules changed in their favor?