Different River

”You can never step in the same river twice.” –Heraclitus

January 28, 2005

Call it the “Botax”

Filed under: — Different River @ 2:01 pm

Lawmakers in several states are considering imposing a “vanity tax” on cosmetic surgery and botox injections. In Illinois, they want to use the money for stem-cell research. In Washington, they want to use it for childrens’ health insurance.

“We could do Botox-for-babies parties. It might be the new thing,” [Seattle Democrat Karen] Keiser said. “Anyone who can afford the money for cosmetic procedures, I don’t think they would be deterred by a little sales tax. You pay it on your lipstick.”

Apparently, Keiser doesn’t know what happened when Congress imposed the “luxury tax” on yachts back in 1990:

[A]ccording to a Wall Street Journal report, “Congressional Democrats [were] eager to show they were being tough on the rich.” A ten percent tax was added to the cost of luxury yachts. Since a yacht today costs anywhere from $100,000 to $200,000, this means that at least $10,000 had to be paid to the government before a potential buyer could get his first whiff of salt air. With the economy already heading for trouble, this was the proverbial straw that broke the camel’s back. Ocean Yachts in Weekstown[, NJ] trimmed its workforce from 350 to 50. Egg Harbor Yachts entered Chapter Eleven bankruptcy, going from 200 employees to five. Viking Yachts dropped from 1,400 to 300 employees. According to a Congressional Joint Economic Committee Study, the boat industry nationwide lost 7,600 employees within one year. As Bob Healy, president of Viking Yachts explained on NBC News, “Every six or seven years, you have a down cycle. You might be off 20 percent, 30 percent, or 40 percent at maximum. Our industry is off 90 percent nationally.”

Apparently, Congressional Democrats figured that anyone who could afford to buy a luxury yacht could afford to pay an extra 10% tax. It turned out that anyone who could afford to buy a luxury yacht could also afford not to buy a luxury yacht. If you have lots of money, there’s always something else you can spend it on, whether it’s a yacht in the Bahamas (assuming they don’t have the tax there) or something else entirely (a bigger house, an airplane, a used yacht). Unfortunately, that other spending doesn’t help the workers who build yachts, because Congressional Democrats apparently forgot that when some rich person spends $100,000 on a yacht, that $100,000 goes to somebody else — usually somebody who’s not rich.

I suspect that anyone who can afford cosmetic surgery in Seattle can also afford not to get cosmetic surgery in Seattle — either by skipping it altogether (remember, it’s a “luxury” because it’s “unnecessary”) or by going to another state to get it.

The above account of the luxury tax is from an article called “Shipwrecked in New Jersey” by Robert A. Peterson. Peterson basically predicted that we would see similar incidents in the future, like the Botax:

The 1993 budget finally repealed the luxury tax, but it was the result of a political deal rather than an acknowledgment of what really makes the economy work. At the same time Congressmen and Senators were voting to repeal the luxury tax, they were voting in new taxes against the rich. Since the repeal of the luxury tax was a political deal rather than an economic one, look for continued attacks against America’s most productive citizens.

3 Responses to “Call it the “Botax””

  1. Dave Schuler Says:

    I think there are perfectly good reasons to oppose cosmetic surgery besides the most obvious ones. One of the less obvious ones is that even cosmetic surgery which in theory is not covered by health insurance raises everybody’s health insurance costs. Why? Because any coder worth their salt can divide the procedure into covered and uncovered parts and, if you’re crafty about how you divide the claims, the bulk of it will end up being covered by insurance. One of the several ways in which elective procedures raises everybody’s health care costs.

  2. Different River Says:

    “Botax” update
    Almost a year ago, I posted a story about how some states were considering taxing Botox injections and other cosmetic procedures.

    My point at the time was that taxing something like that is not really a very good way to generate tax revenue, since a…

  3. …no third solution » Blog Archive » 20,000% Says:

    [...] A ten percent ad valorem on yachts literally decimated the domestic yacht-building industry, as Different River explains citing this paper by FEE: Ocean Yachts in Weekstown[, NJ] trimmed its workforce from 350 [...]

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