Tax Collections and Spending as a Potential Measure of Health Policy Association With Indoor Tanning, 2011-2016

Abstract

This study examines the association between excise tax collections from indoor tanning facilities and use of the facilities since institution of the Affordable Care Act.

As part of the Affordable Care Act (ACA), a 10% excise tax was imposed on the provision of indoor tanning services in July 2010. Besides funding health insurance expansion, the tax was designed to discourage indoor tanning, which significantly increases the risk of developing melanoma and nonmelanoma skin cancer and costs over $343 million annually in direct medical care.¹ Although reported adherence had been high in 1 state,² the Internal Revenue Service (IRS) acted to improve adherence nationally in 2011 and 2012. Tax collections are proportional to US consumer spending on indoor tanning services and correlated with the prevalence of indoor tanning.

Methods

Annual collections and the number of quarterly returns filed for the indoor tanning services excise tax from 2011 to 2016 were extracted from the 2014 IRS Data Book,³ IRS ACA statistics,⁴ and a Freedom of Information Act request filed with the IRS. Revenue projections were obtained from the Joint Committee on Taxation’s 2010 report.⁵ For comparison, growth in US consumer spending on services was estimated by personal consumption expenditures on services (PCESV), a measure tracked by the Bureau of Economic Analysis. All statistical analyses were conducted using Microsoft Excel (Microsoft Corp). This study was deemed exempt by the University of Pennsylvania Institutional Review Board.

Results

From 2011 to 2016, collections decreased by 13.0% and the quantity of returns filed fell by 21.3% (Table). Each of these percentages peaked during the 2012-2013 period and have declined each year since then. Collections were substantially below ACA projections in all years. From 2011 to 2016, PCESV rose by 22.6%.

Table. Indoor Tanning Services Excise Tax—Projections, Collections, and Returns.

Characteristic	2011	2012	2013	2014	2015	2016	% Change
PCESV, $, billions	7093	7312	7527	7893	8299	8699	22.6
Projections, $, thousands	200 000	200 000	300 000	300 000	300 000	300 000	50.0
Collections, $, thousands	86 262	91 468	91 655	84 435	78 062	75 068	−13.0
Quarterly returns	47 000	49 000	46 000	44 000	41 000	37 000	−21.3
Mean collections per quarterly return, $	1835	1867	1993	1919	1904	2029	10.5

Abbreviation: PCESV, personal consumption expenditures on services.

Discussion

Our findings indicate that US consumer spending on indoor tanning and the number of indoor tanning providers have diminished considerably since 2013. Moreover, the contraction in consumer spending on indoor tanning is even more apparent compared with the growth in overall consumer spending. These results are consistent with survey studies suggesting a decrease in the prevalence of indoor tanning since 2010.⁶ Previous surveys demonstrate that the prevalence of indoor tanning had been increasing as late as 2009,⁷ implying a trend reversal coinciding with the tax’s implementation.

Using non–survey-based methods to assess the association of health policies with population behavior can provide complementary and perhaps more reliable evidence of such trends. Recently, historical tax revenues have been used to estimate the effects of taxes on other harmful health behaviors, including tobacco consumption,⁸ and search pattern tools, such as Google Trends, have been used to study myriad aspects of population behavior.⁹

Our study is limited by exclusion of qualified physical fitness facilities, whose membership fees are exempted from the tax if tanning services are incidental to the primary business activity. This post-ACA exemption may have contributed to the discrepancy between projections and collections. In addition, quantifying the prevalence of indoor tanning using tax collections requires pricing and adherence data, which were unavailable. Thus, the rise in collections and returns from 2011 to 2012 may reflect an increased adherence rather than a true increase in tanning services. Finally, although the decrease in returns from 2012 to 2016 likely owes to tanning industry decline, it may also reflect consolidation among tanning businesses.

The excise tax has been criticized for causing tanning industry job losses and failing to meet revenue projections; however, these considerations are secondary to the public health objective of deterring indoor tanning. Although the data demonstrate that indoor tanning has decreased significantly since the tax’s implementation, they cannot confirm a causative association. Future studies should investigate the relative effects of the tax and other restrictions and initiatives on indoor tanning practices.