TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, July 31, 2008

State Taxation of Cosmetic Surgery

Tax_analystsJ. Carolina Chavez (J.D. 2008, George Washington) has published An Exploration of "Vanity Taxes" as a Method of Increasing State Revenue, 49 State Tax Notes 255 (July 28, 2008).  Here is part of the Introduction:

Last year, Americans spent over $13 billion on cosmetic procedures, both surgical and nonsurgical, ranging from liposuction to breast augmentation. ...  Not surprisingly, the vanity industry has caught the eye of politicians across the nation who hope to find new sources of revenue for struggling social programs. That proposed cousin to the sin taxes, which states impose on alcohol, cigarettes, and gambling, is in essence an expansion of the sales tax to cover what has been traditionally considered part of the service industry. As with past attempts to tax professional services, many questions arise when considering the taxation of cosmetic surgeries: What constitutes a cosmetic procedure? Does a tax on those procedures discriminate against women? Is it regressive? Is it a form of social legislating?

This article first reviews the history of the sales tax and the unsuccessful attempts to extend it to services. Next it looks at the social implications of taxing cosmetic services, specifically the possible discriminatory repercussions of imposing that tax. Finally, it looks at whether that potentially regressive tax meets the goals of the legislators who seek to levy it. Despite the seeming benefits of taxing what some would consider a luxury, this report concludes that the policy costs of taxing cosmetic procedures greatly outweigh their minimal financial benefits.

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It should be noted that tax laws can discriminate in favor of plastic surgery, by allowing a business expense deduction, over most other capital expenditures, which are generally amortized over their useful lives, and education, which for a first career is neither deductible nor amortizable except to a very limited extent through deductions and credits with fixed dollar caps. Sales tax of a few percent wouldn't necessarily shift the balance.

Posted by: Anonymous | Jul 31, 2008 7:34:49 AM

I have addressed arguments like Chavez's in this blog post:

Posted by: Frank | Aug 1, 2008 3:28:38 PM