You’re so vain, I’ll bet you think this blog is about you, don’t you?
That’s because Americans spent $10.3 billion on 12.1 million cosmetic procedures last year. And Congress thinks it’s time to cash in. The Senate is currently considering imposing a 10% excise tax on cosmetic procedures which are not medically necessary. These would include nose jobs, face lifts, teeth whitening, Botox, hair transplants and boob jobs – basically items which are disallowed as deductible medical expenses under Section 213(9) of the Tax Code:
(9) Cosmetic surgery.—
(A) In general.— The term “medical care” does not include cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease.
(B) Cosmetic surgery defined.— For purposes of this paragraph, the term “cosmetic surgery” means any procedure which is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.
Revenue raised from the tax would – what else – help fund the $1 trillion health care reform plan. Senate Finance Chairman Max Baucus (D-MT) has alternately described many of tax proposals, including this one that came out of committee today, as “interesting,” “creative,” and “kind of fun.” Boy, those Senators know how to have a good time.
But will the tax work? No (you heard it here, folks). And here’s why not:
- It will be a struggle to get the tax through Congress. Plastic surgery is huge, huge business these days. The industry has a fairly powerful advocacy group (American Society of Plastic Surgeons) which has already voiced opposition to the tax. Additionally, the ASPS believes that the tax would be (*cough*) “discriminatory to women” – just wait until that gets some spin on The View.
- While there are criteria for the tax (as set out in Section 213 of the IRC), it is largely subjective. As proposed, the burden of collecting the tax would likely fall on the doctors performing the procedure. Conflict of interest, anyone?
- It will be an administrative nightmare. Many doctor’s offices are already swamped with insurance and other paperwork. Taxing *some* cosmetic procedures and not others will be overwhelming. So they just won’t do the paperwork.
- Historically, similar taxes have not been successful. Only one state continues to have an excise tax on cosmetic surgery on the books: New Jersey. The tax has been controversial and has only brought in about 25% of anticipated revenue. Why? See #2.
- And while this looks like a tax on the rich, which sounds better to most taxpayers than taxing the middle class, at least one ASPS survey indicated that a majority of patients had income levels of between $31,000 and $60,000: solidly middle class. Patients earning more than $90,000 constituted a mere 13% of business (my guess is that they didn’t survey in Hollywood). Congress doesn’t want to be viewed as raising taxes on the middle class.
So here’s my new tax planning advice: stay away from soda. Congress will tax it and it will make you fat. And then you’ll want a tummy tuck and Congress will tax it.
To save on taxes, drink water. At least until Congress decides to tax it, too.
In an effort to fund their massive health care plan, members of Congress are scrambling to find revenue. After searching under their car seats and sofa cushions for extra change, they have basically admitted that the well is simply dry.
And that proposal to tax employer provided health care benefits? It’s just not picking up enough support to push through. Democrats, in particular, are balking. It is, after all, the run up to the 2010 elections – and no one wants to raise taxes on the run up to the elections, especially when 36 seats are up for grabs in the Senate alone.
Wait. I meant that no one wants to raise taxes on the middle class on the run up to the elections.
The rich? That’s a different story. Sen. Kent Conrad (D-ND) has now advised that members of the Senate are considering taxing employer provided health care benefits but exempting benefits under $25,000. That would mean that only those with the most expensive health care plans, sometimes called “Cadillac” plans (though with GM in bankruptcy, I think we should start calling them “Mercedes” plans – or even “Hyundai” plans), would pay taxes on benefits. That might *might* pass muster in Congress. It just won’t make people with those health care benefits happy.
But at least it will solve the health care budget problems.
Oh wait… it actually won’t solve the health care budget programs. According to Sen. Max Baucus (D-MT), the hole in the budget after making other accommodations is a whopping $320 billion. Taxing pricey health care benefits would only put a mere $90 billion dent in that number over 10 years. That leaves nearly a quarter of a trillion dollars still left – just for health care. Not for education. Not for military. Not for infrastructure improvements.
And since I’m fairly certain that we’ve become immune to how big these budget numbers are, I’m going to write them out.
The hole in the budget for health care is $320,000,000,000. After raising taxes on health care benefits, it’s still $230,000,000,000.
All of those zeros are worrying: they have to come from somewhere.
And where do you think they’re coming from? Hmm.,,
When Ed Liddy took the reins of troubled insurance giant AIG, he probably thought it would be tough. I’m guessing he had no idea how tough. Today, Liddy will face the House Financial Services subcommittee on capital markets in DC, and chances are, he’s in for a flogging.
It’s now been made clear that AIG will have to return $165 million that it paid out in executive bonuses to the Treasury Department in 2009. According to Geithner: “We will impose on AIG a contractual commitment to pay the treasury from the operations of the company the amount of the retention awards just paid. In addition, we will deduct from the $30 billion in assistance an amount equal to the amount of those payments.” That’s right, double.
Public anger over the bonuses has not subsided. The bonuses, which total more than $165 million were said to be contractual “retention” bonuses. It has since been revealed that at least 11 of the 73 employees (15%) that took the money no longer work for AIG – so much for retention, huh? Additionally, the sector which received the bonuses, the financial products sector, has been charged with the primary blame for the AIG meltdown. In other words, these folks help run the company into the ground and got a nice big check for doing so.
All of this while AIG is operating on $170 billion in bailout money – $150 billion of which was promised before the provisions of TARP even took effect (thanks, ex-Secretary Paulson). AIG is scheduled to receive another $30 billion this year. That’s about the same amount of money the Big Three automakers asked for in the fall – you know, when we made them jump through some (potentially deserving) hoops to prove that they would be responsible with our money.
Of course, the bonus situations really should come as no surprise. This is the same company that, just days after receiving its first bailout payments in 2008, sent executives on a $440,000 retreat to a posh California resort. Those same executives – the ones who are perhaps indirectly responsible for massive layoffs that followed – spent the equivalent of two full years’ salary for someone making minimum wage in just a few days on spa treatments alone. Yep, spa treatments.
Congress sat back and let it happen. And now, they’re apparently waking up.
Just a day after Sen. Max Baucus (D-MT) suggested an excise tax on the bonuses, a key GOP Senator has stepped in to support the idea. Sen. Chuck Grassley (R-IA), who is the top ranking Republican on the Senate Finance Committee, will lead the vote on a measure which makes all retention bonuses subject to a 35% excise tax for excessive compensation to be paid by the company and by the individual. Nonretention bonuses of more than $50,000 would be subject to the same tax. If passed, the provisions would be retroactive to January 1, 2009, which means those AIG bonuses would be taxable under the new scheme.
AIG has since pledged to reduce 2009 bonuses by about 30%. They claim they need to keep their bonus structure – but do they? All of this talk of “talent” jumping ship if the company does away with the bonus structure is crazy. Where is the talent to begin with? If “talent” like that is what’s holding AIG together, then maybe it’s time for AIG to redefine the meaning of talent.
Here’s the thing: millions of Americans go to work every day and (gasp) do their job without being promised a little something extra. I know that’s hard for folks on Wall Street to understand, but it’s true. Even law firms are learning that paying out bonuses for simply showing up and doing your job is a bad idea: BigLaw, in the midst of thousands of legal layoffs, is scaling back – and in some cases eliminating – bonuses. You’re not owed a bonus, you earn a bonus. The definition of bonus is “a gift to reward performance.” Just think about that.
Grassley has. On yesterday, remarking on the bonuses, he said, “there’s just so much that the taxpayers of this country are going to stand for.” And he’s right.
