Taxing Life-Saving Medical Devices

Tait Trussell is a national award-winning writer, former vice-president of the American Enterprise Institute and former Washington correspondent for The Wall Street Journal.


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According to a September 2011 paper for the Manhattan Institute, the effects of a new excise tax on the medical device industry will be disastrous.

The study deals with a provision of the president’s massive health care overhaul law that levies an excise tax on the medical device industry. The tax will take effect at the start of 2013. This tax, the study finds, will shrink employment in the industry by cutting demand for medical devices and by “encouraging American firms to shift production overseas.” In effect a double whammy to the Obama administration’s goal of creating more jobs and keeping employment from moving to other countries.

The paper was written by Diana Furchtgott-Roth and Harold Furchtgott-Roth. She is a senior fellow at the Manhattan Institute and former chief economist of the U.S. Labor Department. He is president of Furchtgott-Roth Economic Enterprises and former commissioner of the Federal Communication Commission, as well as a former congressional economist.

This tax, one of many taxes in the ObamaCare law, is an excise tax on medical device manufacturers. It is deceptive. While small in amount—2.3 percent—the levy is taken from the revenue line, not the bottom line, magnifying its impact. According to the Advanced Medical Technology Association (AdvaMed), medical device makers reported taxable income of $13.7 billion in 2006 and paid $3.1 billion in corporate taxes. When the new tax goes into effect, the tax burden will roughly double and “raise the average effective corporate income tax rate to one of the highest…in the world,” the Furchtgott-Roth said.

The devices include such items as coronary stents, X-ray machines, in vitro diagnostic substances, MRIs, artificial joints, surgical equipment, and a variety of other medical technologies.

The tax would be especially burdensome to companies that create novel technologies. “The new tax could force companies that would otherwise never leave the U.S. to make difficult choices based on stark economic realty,” said Stephen J. Ubl, president and CEO of AdvaMed. He said it’s “important for the Administration and Congress to understand the device tax is counterproductive to economic growth and … putting more Americans to work.”

Under the provision, eyeglasses, contact lenses, and hearing aids — items sold at retail — are exempt from the new excise tax. It’s just the more vital and life-prolonging devices and apparatuses that are to be taxed.

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  • StephenD

    "With the tax, manufacturers in this country “will be more likely to close plants in the United States and replace them with plants in foreign countries….U.S. leadership in this industry could be threatened.” The excise tax “will substantially harm the American consumer, the medical device manufacturing industry, and workers in that industry.”

    Would an avowed Communist have done any different to subvert America? Tell me ONE THING this Administration has done that a Socialist, Anti-American Operation would not have done. He is doing exactly what his handlers instruct him to do. Woe to America if he gets re-elected.

  • oldtimer

    Without life saving devices, guess what happens?! No life saving. Is this a form of population control? Who needs health insurance if there are no tests and proceedures because the companies who provide the means necessary for them are out of business?

  • JoC

    I also believe that consumers will have to pay taxes on certain procedures like MRIs.
    I subscribe to a newsletter and they found a 15 member commission that has already been appointed.
    There job is to REGULATE –
    1) How many doctors we need
    2) How much they should earn
    3) Where they should work
    4) What kinds of treatment they should AND should NOT give you

    In Britian, a woman who was very ill with cancer found out that her insurance company no longer covered the drug she needed. It was critical for her treatment so the family decided to pay out of pocket but the COMMISSION WOULD NOT ALLOW IT!!! They wanted everything to be EQUAL!!! They didn't think it was FAIR for this woman to have access to the drug when there were others who couldn't afford it. So they made her choose between the two. She could not have both!!! The woman died.
    http://www.timesonline.co.uk/tol/life_and_style/h

    Donald Berwick, who Obama has put in charge of Medicare & Medicaid, condones this model… it is called NICE.
    http://www.weeklystandard.com/blogs/not-nice
    http://www.biotechnologyhealthcare.com/journal/fu

    We have to fight this.

  • http://www.theconservativeteen.com/toc Susan Rawlings

    The truly frightening thing about all of this is that this is just the beginning. Obama's staff is looking for all kinds of new ways to generate revenue, and they can't do that with people who don't work or are living below the poverty level. We need to save this country for our kids. There are resources out there that can help with this, including publications like The Conservative Teen. Check it out online. The social and political issues it addresses for future generations are so important, critical even. You can find it at http://www.theconservativeteen.com/toc.

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