The IRS debates the Snooki tax

at 09:30 AM ET, 10/12/2011


(MTV)
Leave it to the Internal Revenue Service to make the one health reform provision interesting enough to warrant a “Jersey Shore” mention into a completely dull affair.

Included among the health reform law’s many funding streams is a tanning tax, a 10 percent fee on indoor tanning services. In the grand scheme of Medicare Advantage cuts and hospital payment reform, it’s a pretty small revenue raiser. But what it lacks in revenue, it makes up in fame. “Jersey Shore” starlet Nicole “Snooki” Polizzi infamously attacked the provision on national television, saying she “no longer goes tanning” and felt “intentionally” targeted.

Snooki has since moved on to other topics, but the debate over the tanning tax continued this morning, when the IRS held a public hearing titled “Indoor Tanning Services: Cosmetic Service Excise Taxes.” About a dozen people showed up. I was among them, and the event was probably just as exciting as anything else that’s held in the IRS’s seventh-floor auditorium. Which isn’t saying much. But for those searching out insight rather than thrills, the hearing captured how much regulation matters in the health reform law, even for those who want to see it repealed altogether.

It would almost be an exaggeration to call attendance modest. The 12 of us didn’t even fill the first row. Three relatively tan men spoke on behalf of their respective indoor tanning businesses. The whole affair lasted about a half-hour, without the Internal Revenue Service asking a single question of the indoor tanning owners who had flown to Washington to testify. And that was it; for every question I asked, I got one back about why, exactly, a Washington Post reporter would find this interesting.

But it was interesting. The hearing was a good representation of where business opponents of the health reform law are right now: They don’t like the law, but they’re begrudgingly learning to live with it. The first speaker, Bart Bonn of the Nebraska-based Ashley Lynn’s Tanning, asked the IRS representatives to “run it up the flagpoll” that the new tax is a problem: He has had to lay off employees. “My request is that you tell the IRS commissioner that this thing is not working,” he said.

The other two speakers — both from larger chains, Sun Tan City and TanPro — were much more focused on getting the regulations right. “We don’t think this provision will be repealed on its own,” Robert Quinn of TanPro told me when I caught him in the IRS lobby. “Maybe it’ll be taken on as part of a larger tax reform,” but right now the company is planning for a future with health reform. Quinn spent most of his time listing the tweaks he’d like made to the tanning tax regulation issued earlier this year.

And that brings up another key point: Regulation may be mind-numbingly boring, but it matters, a lot. Take the tanning regulation: The law imposes a tax on “any indoor tanning services equal to 10 percent of the amount paid.” But that actually raises a lot of questions: What about places that offer tanning without a specific fee, like a gym? As I learned at today’s hearing, gyms, salons, video stores, even laundromats now offer tanning services as a sort of bonus perk to draw in customers, often without charge.

The IRS had to address this question. In a preliminary regulation, it decided that places that include tanning, but without a specific price, are not subject to the new tax. That has indoor tanning salons furious; it was unfair, they argued, to tax one provider of tanning services but not the other.

“People in the industry are asking why a video store bundles five video rentals with a free tan, they don’t have to pay the tax,” Quinn said during his testimony, urging a change in the final regulation. “This just defies logic.”

In the grand scheme of things, the tanning tax regulation is a few pages in the hundreds of thousands that will ultimately be written for the Affordable Care Act. But if you’re a tanning salon, it matters a lot — much more than any of the politics surrounding Romneycare or news conferences on repealing the law. An IRS public hearing might be boring, but for the future of health reform, it’s actually where a lot of the action is at.

 
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