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Wednesday, January 18, 2012

The job-killing med-tech tax 

The looming tax on medical device revenues -- not profits, but revenues -- is just one of the current government's policies that obviously destroy jobs in what was one of America's most competitive industries. The effects of the tax on jobs in the industry was so predictable it is hard to believe it was not intentional, rooted in the Obama administration's intense desire to break down opposition to Obamacare.

Of course, the negative effects of the device revenue tax go far beyond directly destroying jobs. Because the tax is on sales, rather than profits, it substantially raises the return hurdles required to fund investments in new medical technology. Yes, it acts directly to suppress innovation in health care. This is also not an accident. Liberal health care wonks have long asserted that most innovation in medical technology increases costs more than the public health benefit conferred by the innovation.

Finally, the effect of the med-tech tax is to entrench the largest companies at the expense of the small, which will, ironically but obviously, tend to raise health care costs. Why? Because it will be much more expensive for the start-ups that do much of the real inventing in health care to sell their products themselves -- the Obama tax kicks in long before actual profits -- so they will license their products to the multinational device companies instead of emerging as new competition for them.

Fewer jobs, less innovation, less competition, and higher prices. Quite a price to pay for a CBO score.


10 Comments:

By Anonymous Anonymous, at Thu Jan 19, 08:35:00 AM:

For the life of me I cannot comprehend how any rational person, much less a whole cadre of party ideologues, could take it as received wisdom that innovation in medical technology raises costs.  

By Anonymous Anonymous, at Thu Jan 19, 08:40:00 AM:

By the way, this devotion to big business versus small is the central theme of Democrat economic policies. In my business small companies are being kicked out of financial technology markets by regulatory fiat. It is the explicit policy. This reduces innovation, jobs and service levels. I remind myself periodically though that it could be worse: Stalin was a lot less gentle than Obama has been.  

By Blogger sykes.1, at Thu Jan 19, 09:24:00 AM:

"Fewer jobs, less innovation, less competition, and higher prices."

These are unintended side benefits.

The point of nationalized medicine is to control cost by denial of care. This includes restrictions on drugs and appliances.

Restrictions on medical school enrollment and specialization will follow.  

By Anonymous Anonymous, at Thu Jan 19, 09:57:00 AM:

Anon Attorney wonders what was the constitutional hook Congress cited to enable what is essentially a federal sales tax on specific product classes?

It is not clear that this falls within Congress' taxing authority such that the tax structure could stand on its own. And given the absence of a severability clause in the Act this tax may fall by the wayside if SCT rules the mandate unconstitutional.

Anon Attorney is counsel for and an investor in medical product startup companies attempting to bring new products to market. He does not like this tax.  

By Anonymous sell electronics for cash, at Thu Jan 19, 03:09:00 PM:

You got a point there. The great our medical technology has become the the greater it cost to us to when it comes to spending for our medication.  

By Anonymous feeblemind, at Thu Jan 19, 08:32:00 PM:

re anon attorney 09:57

While I am sympathetic to your premise, permit me to play devil's advocate for a moment, and ask;

How is a tax on medical equipment different than a federal tax on booze or cigarettes? Or a luxury tax on yachts?  

By Blogger Georgfelis, at Thu Jan 19, 09:13:00 PM:

"Finally, the effect of the med-tech tax is to entrench the largest companies at the expense of the small, which will, ironically but obviously, tend to raise health care costs. Why? "

Because the Big Companies donate more money to Political Campaigns, silly. Gee, I would have thought that to be obvious. :)  

By Anonymous Anonymous, at Thu Jan 19, 09:32:00 PM:

> so they will license their products
> to the multinational device companies
> instead of emerging as new
> competition for them.

A question to Tigerhawk. Is your company big enough to be unionized?

Vilmos  

By Anonymous Anonymous, at Fri Jan 20, 10:50:00 AM:

@ feeblemind:

It's a good question. I am not an expert in tax law and don't know what the constitutional hook it for federal taxation of smokes, booze, and other vices, like luxury yachts (/sarc/). I assume it is the all-expansive Commerce Clause, which has turned Constitutional Law upside down in this country.

My comment was a bit unclear. My bad.  

By Blogger Gary Rosen, at Sat Jan 21, 12:27:00 AM:

"what was the constitutional hook Congress cited"

Constitution? We don't need no steenking constitution!  

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