LITTLE ROCK — A 10 percent federal sales tax on the tanning-bed industry designed to help pay for the recently passed healthcare legislation has already cost Arkansas jobs, officials with country’s leading tanning-bed manufacturer said Friday.
JK North America-Sun Ergoline, based in Jonesboro, laid off seven employees in March and plans to cut the hours of another 36 workers in half next month, said Jerry Deveney, the company’s executive director of sales.
The company has about 150 employees in Jonesboro.
Although it’s still not clear when the “tan tax” will go into effect, tanning-bed operators have already started scaling back equipment purchases, he said.
Orders for equipment to be delivered later this year have declined by 10 percent to 15 percent since the tax was first proposed in December, he said.
“They’re starved for money to pay for health care,” Deveney said.
The tax has been estimated to raise about $2.7 billion over 10 years by the Congressional Joint Committee on Taxation.
That’s just a small fraction of the estimated $940 billion that it will cost to implement the health-care legislation over the next decade.
Companies like Ergoline and tanning-bed operators opposed the tax, telling the Arkansas Democrat-Gazette in a Jan. 3 story that they were being unfairly singled out and the tax would drive many small operators out of business.
In January, several small tanning-bed operators in central Arkansas said they would reduce the number of beds they offered or get out of the business altogether.
Deveney said the industry might be hurt further by proposals circulating within the federal Food and Drug Administration to restrict tanning-bed use or to ban minors from using them. He was in Washington, D.C., this week to lobby against such restrictions.
“They’re hitting us from both sides. Just when you think it’s over, it gets worse,” he said.
It’s still unclear when the tax goes into effect. Deveney said he has heard dates ranging from July 1 to sometime next year.
Arkansas’ Democratic Sens. Blanche Lincoln and Mark Pryor and U.S. Rep. Marion Berry were open to the company’s arguments, Deveney said, although they cast votes in favor of legislation containing the tax in December.
Pryor would continue to monitor the situation, his office said.
“Given our tough economic times and scientific evidence linking skin cancer to UV rays, I understand the tanning industry is concerned about job loss. I’m not convinced a new tax on tanning services will significantly disrupt the industry, but I will closely monitor its impact and ... have conversations with the industry and health-care professionals regarding this issue,” he said in a statement.
Berry voted against the health-care measures. He said he was opposed to paying for health-care changes with increased taxes. Instead, negotiating drug prices, cheaper drug importation and regulating the insurance industry should have been pursued, he said.
Berry said in a statement that he “did not support a lot of the taxes within the bill,” which “weighed” in his decision to vote against it.
Lincoln “made every effort to remove the tanning tax,” said spokesman Charlie Gocio. She regrets it was not taken out of the bill, he said.
Since dermatologists and scientists acknowledge little difference between UV exposure from sunlight and indoor tanning beds, Deveney said, it’s just a matter of time before the government extends its fiscal reach to sunbathers.
“It’ll reach the beach. We see it coming,” he said.
The tax was substituted just before the Senate’s Dec. 24 vote to replace a proposed 5 percent sales tax on Botox injections and other cosmetic procedures. At the time, the tanning industry accused lawmakers of favoring wealthy women, dermatologists and cosmetic companies over them.
Democratic leaders in Congress and dermatologists say the tax will save lives and lower medical costs. Higher prices will discourage new users and persuade those already using tanning beds to reduce their hours under the lamp.
Deveney said he didn’t understand why manufacturers of suntan lotions with minimal protection from ultraviolet radiation escaped taxation. He said he appreciated the efforts of the Arkansas congressional delegation to fight the tax but “they were just outnumbered.”
“We used to be land of the free. Now we’re the land of the fee,” he said.
Front Section, Pages 1 on 03/27/2010