As the health care bill passed another hurdle early Tuesday morning with three more votes in the Senate, Botox maker Allergan Inc. (AGN) no doubt breathed yet another sigh of relief. Aiming to pass the bill before Christmas, legislators refrained from taxing elective cosmetic procedures, and instead opted for a tax on tanning salons.The legislation includes taxes and other levies on various industries to fund the $871 billion bill. The Botax, as it has been nicknamed, was going to be a 5% tax on such things as Botox injections to smooth wrinkles, breast implants -- another Allergan product -- face-lifts and other elective cosmetic procedures. Senate Majority Leader Harry Reid dropped that plan, however. Instead, it was replaced with a 10% tax on indoor tanning services.
Some may wonder: Why tax one and not the other? Aren't both essentially elective cosmetic procedures? Moreover, according to the congressional Joint Committee on Taxation, the tanning tax would raise an estimated $2.7 billion over 10 years, while the cosmetic surgery tax had been projected to raise over $5 billion.
Tanning Salons Made an Easier Target
It seems it mostly came down to lobbying muscle. While the Botax drew fierce opposition from Allergan, plastic surgeons, and the medical community in general, the Indoor Tanning Association seemed to lack the necessary lobbying muscle.
Allergan CEO David Pyott personally raised objections to the tax with lawmakers, according to Reuters, and the company launched a website and Facebook page to stir up public opposition to it. And Allergan wasn't alone. The company's efforts were supported and complemented by heavy lobbying from plastic surgeons and the medical community in general. They argued the Botax would unfairly hit middle-class, working women who make up a large portion of their patients.
Legislators seemed to face a tough decision: Risk losing the doctors' crucial support for the bill or find that funding elsewhere. IT was at this point that doctors came to the rescue, as the American Academy of Dermatology Association suggested the tan tax. Of course, it was accompanied by warnings from the Food and Drug Administration and from the National Cancer Institute about cancer risks from tanning beds' ultraviolet rays. No sooner than the Botax was dropped, the American Medical Association announced its support for the Senate bill.
It certainly seems that tanning salons were an easier target. The Indoor Tanning Association estimates that some 20,000 salons operate in the U.S., most of them small businesses with over 50% female ownership (compared to 25% in other businesses). The tax will hurt an industry already suffering from the recession, it claims. And as for the cancer risk, the association claims moderate tanning can have health benefit of vitamin D production. Indeed, phototherapy performed by a medical professional wouldn't be taxed.
The Senate is aiming for a final vote on the bill by Christmas Eve. The measure will then need to be reconciled with the House's bill, which will be challenging in itself. It may be hard to find a common language on several issues, including abortion, where major divisions exist between House and Senate Democrats.