Discriminatory taxation

Scientific Forum

Editorial

Discriminatory Taxation

D

uring the past several years, as most state governments descended into financial deficits, governors and legislators have begun looking for new ways to balance their budgets, either by cutting spending or collecting more money. Unlike the federal government, states cannot spend at will and run up huge deficits (the current federal deficit is over $7.8 trillion). Spending cuts in areas like education, Medicaid, law enforcement, and highway maintenance are very unpopular with the electorate, and therefore studiously avoided by politicians always eyeing the next election. General tax levies are even more unpopular, since they hit everyone’s pocketbook. New and creative ideas to raise money, such as lotteries, have become welcome alternatives. The latest money-raising scheme started in New Jersey, where legislation was introduced to place a tax on cosmetic surgical procedures (6% on gross receipts), as well as a separate tax on gross receipts of ambulatory surgery centers (3.5% or $200,000, whichever is less). This legislation nearly set a record for speedy passage by both houses of the legislature (within 72 hours), and the governor signed it into law only five days later. Lawmakers apparently felt that a thorough discussion and debate was neither warranted nor wise. This probably is because the many reasons not to impose this tax might have come to light: the tax is discriminatory, it sets a new precedent of taxing a specific service, it disproportionately impacts women, and it is difficult, if not impossible, to enforce equitably. In New Jersey, to make this highly questionable tax more palatable, the revenue to be generated was earmarked to fund uncompensated hospital care—essentially a “Robin Hood” rationale aimed at garnering popular support. Having “gotten away with” taxing cosmetic procedures, New Jersey’s emboldened legislators recently introduced a bill that would require all office-based surgery centers to become licensed. The sales pitch was public safety, but there was an underlying motive. Patient safety has always been plastic surgeons’ first priority, and we have a long history of supporting mandatory accreditation of surgical facilities in order to protect the public. However, the reality is that the motive for the New Jersey bill was to allow the state to collect

the gross revenue tax by monitoring currently exempt office facilities. In this instance, the medical community, led by plastic surgeons, reacted decisively and quickly. While not yet technically defeated, the authors Michael F. McGuire, MD, is a of the bill have indicated board-certified plastic surgeon that they are not planning and ASAPS member, and Immediate Past President of the to move forward with it. American Association for Good news travels fast, Accreditation of Ambulatory Surgery Facilities (AAAASF). of course, and legislators all over the country have embraced the “New Jersey experiment.” Legislation has been introduced in Arkansas, Illinois, New York, Tennessee, and Texas to tax “cosmetic” procedures (not just surgery), and in some cases a “worthy” cause has been selected as the recipient of this new anticipated windfall. In Illinois, the money would go to fund stem cell research, and in Washington, it would fund a state-uninsured children’s program. The implication, of course, is that cosmetic surgery is a personal indulgence that should somehow be taxed for “the greater good” of society. There is legitimately good news, however, from New York and Tennessee. In New York, a strong coalition of physicians and physician organizations led to rejection of the cosmetic tax proposed by the State Assembly. Likewise, intense local activity and lobbying efforts in Tennessee resulted in defeat of a taxation proposal. These victories are significant and demonstrate what can be done with well-directed efforts from physician organizations and others who oppose discriminatory taxation that is detrimental to quality patient care. New Jersey’s state constitution allows the state to impose taxes on specific groups, but in most other states such a tax would be unconstitutional as discriminatory. Imposing taxes on services rather than goods has historically been avoided, so there are several bases for opposing these taxes when they are proposed. In addition, taxes on cosmetic surgery disproportionately affect women, who constitute the majority of voters and con-

AESTHETIC

SURGERY

JOURNAL

~

MAY/JUNE

2005

273

SCIENTIFIC FORUM

sumers of these services; most cosmetic surgery consumers are not wealthy individuals, but rather middleclass taxpayers, and enforcement costs will substantially erode revenues. The New Jersey experience is proving that enforcement is very difficult, and the actual revenue is much less than expected. Determining which procedures to include and how to deal with mixed cosmetic and reconstructive procedures has been a challenge. The collections have also been disappointing—off 75% from predictions for the first quarter and now expected to generate only $6 million per year rather than the anticipated $26 million. At that rate, the costs and difficulties of collecting the tax are hardly worth the effort. What should we do as aesthetic surgeons when state legislators propose such a tax in our states? The same response should be launched as when any other threatening, onerous legislation is proposed. We must demand that our state, regional, and national societies act immediately to oppose such bills by talking to key contacts in the legislature and educating them about the many constitutional, regulatory, and practical problems posed by such taxes. We must work with the state medical associations to coordinate a response plan, testify at legislative hearings when such bills are proposed, inform the public about the issues, and organize a broad-based coalition of opponents to include patients, the national ambulatory surgery center organizations and accrediting associations, and other specialties involved in ambulatory surgical care. As the recent defeats of cosmetic surgery taxation propos-

274

Aesthetic

Surgery

Journal

~

May/June

als in New York and Tennessee have shown, such efforts can be successful. Leadership of the American Society for Aesthetic Plastic Surgery (ASAPS) has recognized that, while advocacy has not been a major part of our mission in the past, we cannot ignore these challenges to our ability to provide aesthetic surgery patients with affordable, quality care. The recent ASAPS membership survey strongly confirmed the desire of aesthetic surgeons to support legislative and regulatory efforts opposing cosmetic surgery taxes. ASAPS is involved in current advocacy efforts in concert with the American Society of Plastic Surgeons (ASPS), and will continue to actively support such efforts as they pertain to our work as aesthetic plastic surgeons. Cosmetic surgery taxes are an inappropriate attempt to solve a much bigger fiscal crisis facing state governments. They must be opposed not only because they are detrimental to patient care now, but also because of their potential impact on the future of healthcare in America. These measures could well lead to taxes on other medical services, closures of ambulatory surgery facilities due to insolvency, decreased patient access to care, and further erosion of physician reimbursement. Our legislators should look for “easy money” elsewhere instead of accelerating the decline of a healthcare system already in crisis. ■ Reprint requests: Michael McGuire, MD, 1301 20th Street, Suite 460, Santa Monica, CA 90404. Copyright © 2005 by The American Society for Aesthetic Plastic Surgery, Inc. 1090-820X/$30.00 doi:10.1016/j.asj.2005.04.002

2005

Volume 25, Number 3