Different River

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

December 21, 2005

“Botax” update

Filed under: — Different River @ 7:55 pm

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 anyone who can afford to get Botox can also afford not to get Botox. It’s similar to the case in 1990 when Congress imposed a 10% tax on luxury yachts — and instead of raising money, they caused unemployment, when yacht sales dropped 90% and yacht-building workers were laid off.

Now, the Sacramento Bee is reporting that doctors and “patient advocates” in California are raising another issue:

More than three dozen consumers, businesses and health groups sent that message to the [California] Board of Equalization this month after the state agency raised the idea of a sales tax on the popular wrinkle treatment.

In letters to the Sacramento-based board, Californians argued that medicines like Botox should never be taxed because such a move might open the door to taxes on other drugs and even medical procedures.

“Even a healthy individual like me can see the problems inherent in looking to medicines as a way to raise sales tax revenue,” wrote Kimberly Jenkins, a Woodland resident who said she is against a Botox tax.

“There’s no guarantee that a person whose election depends on getting the budget under control is going to make sound decisions about what medicines to tax,” added Jenkins.

(And how, exactly, is that different from taxes on anything else? ;-) )

That request came after state tax auditors started asking dermatologists why they hadn’t charged sales tax on Botox treatments for cosmetic purposes since 2002, the year the substance was approved by the Food and Drug Administration for cosmetic treatments.

Doctors argued that prescription medicines were exempt from sales tax, but auditors pointed to state regulations specifying that the exemption applies only if medicines are used to treat “disease,” not to erase wrinkles for cosmetic purposes.

A lobbyist for the physicians raised concerns about tax auditors peering at confidential patient files, asking what expertise the auditors had to decide which treatment was cosmetic and which was medical.

“I don’t believe legislators are better able than doctors to decide which prescription medicines are necessary,” Villarreal wrote. “We Californians are already paying very high taxes, and certainly some of the most expensive health care costs in the country.”

(If that last argument is right, what business do legislators have telling us which medicines are legal? How do they know that, say, Vioxx is too dangerous but Celebrex isn’t? What, because they created an FDA run by doctors and scientists? Well, they also created a Board of Equalization which, in theory, can hire whatever experts they want.)

Sales of the drug have exploded and have come close to hitting $1 billion a year since the FDA authorized its use for cosmetic treatments three years ago. While that could make a nice tax revenue generator for the Golden State, it also could affect sales of the product.

(A rare correct use of economics in a news story! Though it would have been nice to explain it so people without a college course in economics would know why it could affect sales of the product. I bet a lot of this reporter’s colleagues don’t know!)

One Response to ““Botax” update”

  1. Sales Tax Says:

    Think of the tax revenue that could be gained from taxing such a large income. I highly doubt that these injections will go untaxed for much longer with that kind of money being made.

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