Tax Lawyer's Blog

Kati Padgitt of the Tax Foundation’s Tax Policy Blog says that Congress is considering passing an excise tax on cosmetic surgery.

She says that sound tax writing policy mandates that a tax be imposed on a specific behavior only if it causes public harm:

Good tax policy would argue that such an excise tax would only be imposed if there was truly a negative harm that cosmetic surgery imposes on others in society (i.e. negative externality), not merely a way to raise revenue.

Which begs the question…is there a negative externality from cosmetic surgeries?

Economics.fundamentalfinance. com says a negative externality exists when an individual or company making a decision does not have to pay the full cost of the decision:

If a good has a negative externality, then the cost to society is greater than the cost the consumer is paying for it. Since consumers make decisions to buy only when marginal cost equals their marginal benefit, and since they don’t take into account the cost of the negative externality, negative externalities result in market inefficiencies unless proper action is taken. (Emphasis Added)

Often that proper action is a special tax.

But Padgitt is not so sure cosmetic surgery creates a negative externality sufficient to subject it to a special tax:

Actually, at first thought, if an attractive appearance provides benefits to others in society that cannot be excluded (i.e. a public good), then maybe there should be a subsidy for cosmetic surgery as opposed to a tax.  

Although I don’t like sin taxes, off the top of my head I can think of at least one negative externality created by plastic surgery:

According to Padgitt’s “negative externality” theory of taxation perhaps we should only impose a tax on bad plastic surgery?

Related Posts (on sin taxes):

• Tax on Bad Foods: Regressivity is Good
• N.Y Governor Patterson Proposes Sin Tax on Sweet Drinks
• Sin Taxes are a Hate Crime, Congressman Says
• San Francisco to Tax Cigarettes to Fund Anti-Litter Program

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