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Medical Device Tax Kills Jobs and Harms U.S. Economy

Posted in Legislation3 years ago • Written by Defender Of LibertyNo Comments

     The mid-term elections are over and Democrats were soundly trounced, so the Affordable Care Act (Obamacare) is once again front and center due to Republicans strengthening their majority in the House and taking control of the Senate. The greater majority of Americans disapprove of Obamacare and favor repealing the law. Unfortunately, although Republicans control the House and Senate, they are not in control of the Executive Branch, so repealing Obamacare is not going to happen. However, Republicans can attack Obamacare piecemeal by targeting specific parts of the law such as the 2.3 percent excise tax on medical devices.

     Excise taxes are mainly levied on gasoline, alcohol, and cigarettes. The main reason the aforementioned items are so expensive is the excise taxes levied by the federal government and state governments. The federal gasoline tax is 18.4 cents per gallon (it started at 1 cent). Every state levies an excise tax on gasoline, which pushes the gasoline taxes paid by consumers to well above 40 cents per gallon, with the national average at 49.86 per gallon. Why am I mentioning the gasoline tax? I mention it because it harms Americans and the economy by burdening Americans with higher gas prices. Higher gas prices raise the cost of living, puts pressure on household budgets, and reduces Americans’ spending power.

     Excise taxes don’t just harm individuals, they harm private sector companies and entire industries. The medical device tax is responsible for Americans losing their jobs, and has inflicted a great deal of harm on the medical device market in the U.S. The job losses have not been reported by the mainstream media, but they are real and have destroyed the livelihoods of thousands of Americans. The following is a list of companies that have laid off workers because of the medical device tax:

Medtronic – The company has laid off 1,500 Americans.

Boston Scientific – The company has laid off 1,400 Americans.

Abbott Laboratories – The company has laid off 950 Americans.

Smith & Nephew – Smith & Nephew is a foreign company that has operations in Tennessee and Massachusetts. Multinational corporations like Smith & Nephew are not immune to the medical device tax. Although Smith & Nephew has a small presence in the U.S., it still laid off 100 Americans and specifically blamed the medical device tax for the layoffs.

Stryker – Stryker has laid off 1,170 Americans. 

     The medical device tax has cost thousands of Americans their jobs, but the damage doesn’t end with job losses. New taxes and tax increases can lead to companies canceling their plans to expand or upgrade their operations. In October 2013, B. Braun Medical purchased 21.5 acres of undeveloped land from Lehigh University to build a new corporate headquarters in Pennsylvania. However, due to the medical device tax, B. Braun has scraped its plan for a new corporate headquarters.

     In an interview with a few days ago, the CEO of B. Braun, Carroll Neubauer, explained that he had to scrap his plan for a new corporate headquarters because B. Braun did not have the cash for the project due to the $13 million hit it has taken from the medical device tax in each of the last two years. Neubauer said, “I just couldn’t build it. I didn’t have the cash. That was probably a $40 million project.” The $40 million would have been spent on construction companies and their employees, building materials, plumbers, electricians, carpenters, hardware, software, office furniture, office supplies, etc., etc., but the medical device tax prevented the revenue that would have been generated for the aforementioned types of businesses and individuals. A new corporate headquarters for B. Braun would not only have benefited private sector businesses, it would have benefited the local government and the State of Pennsylvania in the form of taxes. 

     The medical device tax is a detriment to Americans and the U.S. economy. Unless the tax is repealed, it will most assuredly increase significantly from 2.3 percent, and state governments will join in as they usually do and levy their own taxes on medical devices, all of which will raise the cost of medical devices, raise the cost of goods sold (COGS) for medical device companies, and force more layoffs. Most companies operating in some capacity in the health care industry operate under razor thin margins, so tax increases and regulations normally result in employee layoffs. The only way to avoid higher taxes and additional layoffs is to repeal the medical device tax. 

     At the beginning of 2015, Republicans in the House should pass a bill to repeal the medical device tax, then the Senate should pass it and send it to Obama. I’m sure Obama will veto the bill, but if Republicans make a clear, concise case to the American people that shows how bad the tax is for them and the U.S. economy maybe Obama makes a rational decision (it would be his first) and signs the bill. If not, Obama will do further harm to Democrats by providing more proof that Democrats are focused on their Marxist agenda and not what is best for America and the American people.

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