In July2010, a10 percent federal sales tax on indoor tanning, known as the tan tax, went into effect. Applauding the imposition of the new tax, the American Academy of Dermatology (AAD) foresees that by discouraging indoor tanning, the tan tax will significantly reduce the risk of skin cancer and consequently the future costs of its treatment, currently amounting to $1.8 billion each year. Recognizing, however, that an alternative to indoor tanning may be the riskier practice of sunbathing, the present paper offers a rational-choice model for addressing the individual’s indoor and outdoor tanning decisions, which is applied to examining his or her response to the imposition of a tan tax and the consequent effect on the hazard of developing skin cancer. The paper challenges the AAD’s forecast, identifying conditions under which a tan tax will rather exacerbate the hazard of skin cancer.
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