Health Reform and Taxes on Medical  Devices

If  left to their own devices, some will  not be controlled and will do what they want.

Idiom: Left to Your Own Devices

May 30, 2012 -  I see the Obama administration has devised a tax to explode innovation in the medical device industry (“Improvised Explosive Device Tax, Wall Street Journal, May 28, 2012).  The device tax is  a 2.3% excise tax on the gross revenues on companies making medical devices -  cardiac defibrillators,  artificial joints,  stents,  MRI Scanners.  

Mind you.  This is not a tax on profits, but on sales and gross revenues.  If you have, for example,  $10 million in sales, and $50, 000 in profits – a 5% margin -  you still  pay $230,000 to the government.   A windfall for the government, a wipe-out for the medical device company, and a total disincentive for the medical device industry, which is composed mostly of startups and medium sized enterprises.

This onerous  tax is supposed to raise $28.5 billion to offset costs of Obamacare, now estimated to be between $1.76 trillion to $2.5 trillion from 2014 to 2024 by government the CBO and OMB. 

Instead it is likely to stifle innovation in innovation hubs like Boston and Minneapolis.  This is why liberal politicians like Elizabeth Warren in Massachusetts and Al Franken in Minnesota are saying there has to be better way to support Obamacare.    Traditionally excise taxes are used to raise money on gas, cigarettes, liquor, beer, and wine, guns, and tires – not on live-saving and lifestyle-restoring complex medical devices,

Tweet: Obamacare’s 2.3% excise tax on the gross revenues of medical device makers  in under fire because it stifles, even kills innovation.