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Side Effects: Obamacare Tax Will Kill Jobs, Strangle Medical Device Industry

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Old 02.14.12, 03:39 PM
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Side Effects: Obamacare Tax Will Kill Jobs, Strangle Medical Device Industry

On 02.14.12 11:30 AM posted by Alyene Senger

Last week, the IRS released its proposed plan to implement the 2.3 percent excise tax on medical devices designed to help foot the bill for Obamacare.

Harmful effects of the health law’s new taxes and requirements on business continue to emerge as its implementation continues. As Heritage’s Curtis Dubay explains, “All tax increases have negative economic effects because higher taxes take resources from the productive hands of the private sector and transfer them to the wasteful hands of politicians.”

As the National Center for Policy Analysis shows, the medical device manufacturer tax is already hurting Americans by reducing employment:
In November 2011, device maker Stryker Corporation announced its intention to layoff 1,000 workers in order to cut costs in advance of the tax.

Another firm, Covidien Plc, announced the layoff of 200 U.S. workers and plans to offshore production to Mexico and Costa Rica.

The Lewin Group estimates the tax will prompt the loss of more than 43,000 jobs across the medical device industry.

Congress can legislate who collects a tax, but it cannot legislate who actually bears the tax’s economic burden. So it is surprising only to Congress that American workers have to bear the brunt of a tax that Congress assumed device manufacturers would pay.

The tax, which begins in 2013, will not only hurt jobs but increase costs and stifle medical innovation. It affects companies that manufacture or import certain medical devices, which includes everything from surgical scalpels to MRI machines. The tax will make it more difficult for manufacturers to supply hospitals and caregivers with devices at an affordable price. And as Stephen Ubl, president and CEO of the Advanced Medical Technology Association, explains, “U.S. medical technology leadership in the world market is threatened by competitor nations who have grown their industries through more favorable tax and regulatory policies.”

The medical device industry simply cannot afford Obamacare’s new tax. Senator Orrin Hatch (R–UT) got it right when he said, “Job creators and consumers shouldn’t have to foot the bill to pay for the president’s partisan health spending law. Hitting medical device manufacturers—an innovative engine of our economy—with a job-killing $28.5 billion tax hike is exactly the wrong thing under a weak economy.”

To learn about economic policies that work, click here.

Brett Ryan is a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm

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