Saturday, February 26, 2011

Tanning Tax

In one version of the health care bill, a 10% sales tax on salons that use tanning beds was introduced. While the tax analysis presented in my Prin. of Micro class focuses on a per unit (per sale) type of tax, a similar effect occurs in terms of economic welfare gains and losses with a per unit or a sales tax. Thus we will see that a tax tends to increase government welfare (as mentioned in the article) and a reduction in welfare to consumer and producers. Overall, the tax is welfare reducing.

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