American taxpayers are well advised to pay close attention to recent history as they take in various media reports interpreting the Senate Health Reform Bill unveiled by Senate Democrats this week. If some of the surprise provisions of the bill remain, and it is passed, Americans will learn a lesson in financing that the state of New Jersey learned the hard way: Creatively taxing the public to raise revenue for other health care expenses does not work.
Consider, the surprise addition to the 2,074-page bill calling for a new 5 percent tax on elective cosmetic medical procedures to supposedly generate $5.8 billion over the next 10 years to help fund the $849 billion dollar Senate plan. As a Democratic New Jersey Assemblyman, I sponsored legislation in 2004 which created a 6 percent tax on cosmetic medical procedures in New Jersey. The tax was a "creative" approach, we thought, to raising an estimated $24-million annually to help fund "charity care" for indigent and uninsured patients.There was little debate and conversation before the bill was passed. This was an untested revenue stream that ultimately failed. Overall, the tax has been expensive to administer and generated only minimal income. Instead of the projected $24 million annually, the New Jersey Division of Taxation estimates collections of less than $9 million — a 62 percent shortfall. Independent studies have proven, that, after two years, for every $1.00 collected in cosmetic tax, the state has LOST $3.39 in total state revenue.
When the tax idea came up late in the 2004 budget debate, one of the few points made was that these services were performed on wealthy women, who could easily foot the bill for the additional tax. In reality, 86 percent of plastic surgery patients are working women. In 2005, the American Society of Plastic Surgeons conducted a survey of people planning to have cosmetic surgery within the next two years. Sixty percent of respondents reported an annual household income of $30,000-$90,000 a year. Most importantly, 40 percent of those reported a household income of only $30,000-$60,000. Only 10 percent of respondents reported a household income of over $90,000, which clearly refutes the suggestion that elective surgery taxes are "luxury" or "sin" taxes affecting a privileged few.
New Jersey was the first state in the union to pass a tax on cosmetic medical procedures. Since then, at least eight other states have considered similar legislation and rejected it.
As a democratic member of the New Jersey General Assembly, I urge Senate Majority Leader Harry Reid, D-Nev., to learn from my mistake in New Jersey and strip the cosmetic tax provision from the health reform bill. Creative taxation on cosmetic medical procedures to help finance health reform is a costly mistake that America can't afford to make.
Joseph P. Cryan has served as Chairman of the New Jersey Democratic State Committee since February of 2006. Chairman Cryan was unanimously confirmed for this position following the nomination of Jon S. Corzine as governor. Cryan previously served as vice chair for a period of four years during which Democrats saw gains every year in the number of offices won across New Jersey. Cryan began his involvement in Democratic politics at the Union Township Democratic Municipal Organization where he served as chair from 1998 until present. Cryan also represents the 20th Legislative District in the General Assembly of New Jersey. He serves as Assistant Majority Leader, chair of the Education Committee and as a member of the Assembly Budget Committee. Cryan is an undersheriff for Union County's Sheriff's Office.