I never understood the logic of Obamacare’s tax on durable medical equipment. If the point is to lower health care costs—supposedly one of the two primary raisons d’ etre for this awful law (the other being to expand coverage)—the last thing you do is tax medical equipment since those expenses will just be passed on to the medical consumer. But I hadn’t considered that the tax could cost Americans good jobs. In an informative column today for Bloomberg, National Review senior writer, Ramesh Ponnuru, discusses both adverse impacts—plus the potential deleterious impact on innovation. From, “Tongue-Depressor Tax Will Harm Jobs, Innovation:”
A year from now, the federal government will start collecting a new tax on medical devices from tongue depressors to imaging machines, thanks to the sweeping health-care overhaul that Democrats enacted in the spring of 2010. People in the industry say it’s already having an effect. In November, citing the new tax, Stryker Corp. (SYK), whose products include artificial hips and knees, announced that it would let go about 1,000 of its workers. Earlier last year,Covidien Plc (COV), maker of surgical instruments, said it would lay off 200 workers in the U.S. and move production to Costa Ricaand Mexico. It, too, cited the tax. Other companies in the field have announced similar measures — or plans to expand production overseas but not in the U.S. — without mentioning the tax.
The sluggish economy is clearly part of the explanation, but the medical-devices industry had been a relative bright spot within U.S. manufacturing, losing only 1.1 percent of its employees during 2007-2008 while manufacturing as a whole lost 4.8 percent. Astudy done for AdvaMed, a trade association for the industry, claims the tax could ultimately cost more than 45,000 jobs.
There are a lot of reasons Obama is not known as the “jobs president.” This is one of them.
Then, there are the estimated added medical costs due to the tax:
Richard S. Foster, the Medicare chief actuary, hasestimated that if the tax is passed on to consumers it will raise national-health costs by $18.2 billion in 2018. Device makers complain that the tax will lead not only to higher prices and layoffs but also to reduced research and development. They also say that when combined with high U.S. corporate-tax rates, the device levy makes relocation to other countries more appealing. Ireland, for one, is actively recruiting medical-device makers to move production there.
Madness. The reason for the tax, the reason for the $500 billion taken out of the hide of Medicare, the reason for so much was to phony the CBO cost estimates. But this tax is hurting America—already—as Ponnuru’s column demonstrates. The entire mess should be repealed.
