Can We Tax the Sun Now, Too?

July 1, 2010

Can We Tax the Sun Now, Too?

Phase one of the federal health care reform starts today! Those who indulge in a certain activity that could increase the likelihood of cancer will feel the effects on their wallet: tanning salons are now subject to a 10-percent tax that is meant to fund further insurance coverage expansion.

This can be seen as a form of Pigovian tax, which raises the costs of certain activities in order to correct for social costs or negative externalities that are not covered in the market price. In this case though, the externalities of tanning beds are internalized: If I choose to tan, I accept the increased risk that I may get skin cancer. If that were to happen, my insurance company and I would have to pay for the cost of treatment. (And it could be that my insurance company chooses to raise my premium if I indulge in risky behaviors, which is their prerogative.) One could argue that a hypothetical person with tanning bed–induced skin cancer could end up costing others in medical bills, but if that were the issue, the problem would lie in the structure of health care provision, not natural externalities.

What’s next? Should we impose more taxes on roller blades, lest I skin my knee or break my ankle? Or junk food? If we want to really get to the root of what causes skin cancer, shouldn’t we be placing the blame where much of it belongs: the sun? It wouldn’t be the first time someone proposed legislation against the sun.

« Read Previous Entry Read Next Entry »

5 Comments »

Caitlin,

In this case though, the externalities of tanning beds are internalized: If I choose to tan, I accept the increased risk that I may get skin cancer.”

I have two comments:

1. I dispute a person’s ability to internalize that risk accurately. People are just bad at guessing things with very low probabilities, let alone assigning costs to them. How much is not getting cancer worth to you? How do you decide something like that? As a general rule, I have a risk-averse personality, so whenever anyone says that something causes cancer, I don’t do it. But I make that decision using my reptile brain, the same part that makes me fear large predators, sudden noises, etc. I certainly don’t put a lot of deep thought into it, so I bet I drastically overestimate the skin cancer rate. A person with a different temperament will drastically underestimate the risk. But will we average each other out? I don’t know, but thanks to the human condition I have reason to doubt it.

Maybe we’re talking about two different things. “If I choose to tan, I accept the increased risk that I may get skin cancer” might mean that we can hold people morally and financially accountable for their decisions. People don’t necessarily have to accurately assess the risk of skin cancer, so long as we hold them responsible for whatever risk they do take. Is that what you’re getting at? I guess I still don’t know where this gets us: if people systemically underestimate their risks of cancer, then a tax will lead to a better allocation of resources.

2. If health insurance is partly subsidized by taxes, then it results in your tax dollars going to pay for my skin cancer. I understand that your reply to this is probably, “then don’t subsidize health insurance!”. But if you accept that we have to have subsidized health insurance for moral or political reasons, isn’t a tax on tanning a good thing?

Consider these choices:

A. Socialized health insurance with no targeted taxes.
B. Socialized health insurance with taxes that target risk-taking free riders.
C. Every person is responsible for themselves and their medical treatment.
D. Taxing the sun.

I understand that you prefer C to B. But do you prefer B to A?

Comment by David C. Miller — July 1, 2010 @ 8:05 p.m.
It is my limited understanding that skin cancer increases the cause for cancer at all stages in life, not just in the few years after you tan. So the rollerblading example wouldn’t really fit.

If someone were to get skin cancer due, in part, to tanning at age 67 when Medicare (the taxpayer) kicks in to pay for treatments, then government would have a reasonable cause to take action.

It is also possible that as with smoking the death of the skin cancer patient is quick, and has no expensive treatments, meaning it is a ‘win’ for Medicare (and George Hamilton).

Comment by Papillon — July 2, 2010 @ 9:49 a.m.
It surprises me that supporters of this tax say that 10 percent is not high enough to change individual behavior, because there is much evidence that taxes of lesser rates change behavior. For example, the earnings tax in Saint Louis is “only” 1 percent, and it has been demonstrated to incite people to locate outside of the city. Also, state and local sales taxes in excess of 8 percent in stores in Saint Louis incite many people to shop online.

Comment by Christine Harbin — July 2, 2010 @ 2:58 p.m.
Well, the earnings tax is applied over a much larger item: income. I think the thought is that the tax might follow somewhat similarly to that of the tobacco tax: a ten-percent increase is accompanied by a three or four percent decline in usage. People will scale back, but I think that is part of their goal. I don’t think the government is able to make these sorts of decisions in a “good” or “fair” way. That being said, if anything is going to be taxed to disincentivize its users, I think tanning may be a less bad tax. I don’t think its a good idea though.

Comment by Caitlin Hartsell — July 2, 2010 @ 4:30 p.m.
Skin cancers are the most common cancers, at least in persons of European (especially northern European) descent. The vast majority of these are basal cell cancers, which are very rarely fatal; the treatment for most of these cancers is relatively inexpensive compared to the treatment for other cancers. These most commonly occur many years after sun exposure, which means that most people who are diagnosed with basal cell skin cancers are well over 50 years of age (i.e., 65+).

Melanoma is the skin cancer which is more frequently diagnosed in younger people, more often fatal, and for which the treatment is relatively expensive. It is much less common that basal cell cancer – about 70,000 cases per year in the US with 8-10,000 deaths, compared to >1,000,000 cases of basal cell skin cancers per year
(with fewer than 1,000 deaths).

The timing between the behavior (use of tanning beds) and the possible deleterious outcome (diagnosis of skin cancer) is quite long (on average, probably 40 years!). For most adolescents, being told that they may develop a problem at age 60 from their actions at age 18 is not a question of difficulty understanding risk, it is the lack of concern about such a risk at what seems to be an infinite length of time.

So, here are the main purposes of this tax:
1) To raise tax revenue in order to be able to claim budget neutrality
2) To preferentially tax an “unfavored” group – white, northern Europeans with disposable income
3) To raise tax revenue from another “unfavored” group – unsympathetic small-business owners from a group with no subtantial lobby
4) To control behavior – maybe

Since the vast majority of skin cancers are related to UV sun exposure (not tanning beds), and since this change won’t impact health care spending for more than 30 years, it really doesn’t have anything to do with health care, now does it?

Comment by Bill H — July 5, 2010 @ 6:04 p.m.

RSS feed for comments on this post. TrackBack URL

Categories

Caitlin,

In this case though, the externalities of tanning beds are internalized: If I choose to tan, I accept the increased risk that I may get skin cancer.”

I have two comments:

1. I dispute a person’s ability to internalize that risk accurately. People are just bad at guessing things with very low probabilities, let alone assigning costs to them. How much is not getting cancer worth to you? How do you decide something like that? As a general rule, I have a risk-averse personality, so whenever anyone says that something causes cancer, I don’t do it. But I make that decision using my reptile brain, the same part that makes me fear large predators, sudden noises, etc. I certainly don’t put a lot of deep thought into it, so I bet I drastically overestimate the skin cancer rate. A person with a different temperament will drastically underestimate the risk. But will we average each other out? I don’t know, but thanks to the human condition I have reason to doubt it.

Maybe we’re talking about two different things. “If I choose to tan, I accept the increased risk that I may get skin cancer” might mean that we can hold people morally and financially accountable for their decisions. People don’t necessarily have to accurately assess the risk of skin cancer, so long as we hold them responsible for whatever risk they do take. Is that what you’re getting at? I guess I still don’t know where this gets us: if people systemically underestimate their risks of cancer, then a tax will lead to a better allocation of resources.

2. If health insurance is partly subsidized by taxes, then it results in your tax dollars going to pay for my skin cancer. I understand that your reply to this is probably, “then don’t subsidize health insurance!”. But if you accept that we have to have subsidized health insurance for moral or political reasons, isn’t a tax on tanning a good thing?

Consider these choices:

A. Socialized health insurance with no targeted taxes.
B. Socialized health insurance with taxes that target risk-taking free riders.
C. Every person is responsible for themselves and their medical treatment.
D. Taxing the sun.

I understand that you prefer C to B. But do you prefer B to A?

Comment by David C. Miller — July 1, 2010 @ 8:05 p.m.

It is my limited understanding that skin cancer increases the cause for cancer at all stages in life, not just in the few years after you tan. So the rollerblading example wouldn’t really fit.

If someone were to get skin cancer due, in part, to tanning at age 67 when Medicare (the taxpayer) kicks in to pay for treatments, then government would have a reasonable cause to take action.

It is also possible that as with smoking the death of the skin cancer patient is quick, and has no expensive treatments, meaning it is a ‘win’ for Medicare (and George Hamilton).

Comment by Papillon — July 2, 2010 @ 9:49 a.m.

It surprises me that supporters of this tax say that 10 percent is not high enough to change individual behavior, because there is much evidence that taxes of lesser rates change behavior. For example, the earnings tax in Saint Louis is “only” 1 percent, and it has been demonstrated to incite people to locate outside of the city. Also, state and local sales taxes in excess of 8 percent in stores in Saint Louis incite many people to shop online.

Comment by Christine Harbin — July 2, 2010 @ 2:58 p.m.

Well, the earnings tax is applied over a much larger item: income. I think the thought is that the tax might follow somewhat similarly to that of the tobacco tax: a ten-percent increase is accompanied by a three or four percent decline in usage. People will scale back, but I think that is part of their goal. I don’t think the government is able to make these sorts of decisions in a “good” or “fair” way. That being said, if anything is going to be taxed to disincentivize its users, I think tanning may be a less bad tax. I don’t think its a good idea though.

Comment by Caitlin Hartsell — July 2, 2010 @ 4:30 p.m.

Skin cancers are the most common cancers, at least in persons of European (especially northern European) descent. The vast majority of these are basal cell cancers, which are very rarely fatal; the treatment for most of these cancers is relatively inexpensive compared to the treatment for other cancers. These most commonly occur many years after sun exposure, which means that most people who are diagnosed with basal cell skin cancers are well over 50 years of age (i.e., 65+).

Melanoma is the skin cancer which is more frequently diagnosed in younger people, more often fatal, and for which the treatment is relatively expensive. It is much less common that basal cell cancer – about 70,000 cases per year in the US with 8-10,000 deaths, compared to >1,000,000 cases of basal cell skin cancers per year
(with fewer than 1,000 deaths).

The timing between the behavior (use of tanning beds) and the possible deleterious outcome (diagnosis of skin cancer) is quite long (on average, probably 40 years!). For most adolescents, being told that they may develop a problem at age 60 from their actions at age 18 is not a question of difficulty understanding risk, it is the lack of concern about such a risk at what seems to be an infinite length of time.

So, here are the main purposes of this tax:
1) To raise tax revenue in order to be able to claim budget neutrality
2) To preferentially tax an “unfavored” group – white, northern Europeans with disposable income
3) To raise tax revenue from another “unfavored” group – unsympathetic small-business owners from a group with no subtantial lobby
4) To control behavior – maybe

Since the vast majority of skin cancers are related to UV sun exposure (not tanning beds), and since this change won’t impact health care spending for more than 30 years, it really doesn’t have anything to do with health care, now does it?

Comment by Bill H — July 5, 2010 @ 6:04 p.m.

July 1, 2010