by Mitch Kokai
Senior Political Analyst, John Locke Foundation
In 2010 … Congress, ravenous for revenues to fund Obamacare, included in the legislation a 2.3 percent tax on gross revenues — which generally amounts to about a 15 percent tax on most manufacturers’ profits — from U.S. sales of medical devices beginning in 2013. This will be piled on top of the 35 percent federal corporate tax, and state and local taxes. The 2.3 percent tax will be a $20 billion blow to an industry that employs more than 400,000, and $20 billion is almost double the industry’s annual investment in research and development.
An axiom of scarcity is understood by people not warped by working for the federal government, which can print money when it wearies of borrowing it. The axiom is: A unit of something — time, energy, money — spent on this cannot be spent on that. So the 2.3 percent tax, unless repealed, will mean not only fewer jobs but also fewer pain-reducing and life-extending inventions — stents, implantable defibrillators, etc. — which have reduced health care costs. …
… Already 235 members of the House of Representatives — 227 Republicans and eight Democrats — are co-sponsors of a bill to repeal the tax. Twenty-three Republican senators but no Democratic senators favor repeal. The Democrats who imposed this tax on a single manufacturing sector justified this discrimination by saying Obamacare would be a boon to the medical devices industry because, by expanding insurance coverage, it would stimulate demand for devices. But those insured because of Obamacare will be disproportionately young and not needing, say, artificial knees. And well before Obamacare, the law had long required hospitals to provide devices to the needy who are uninsured.
Unsurprisingly, Sen. Scott Brown, R-Mass., supports repeal of the tax. Surprisingly, so does his opponent, Elizabeth Warren, an impeccably liberal Obamacare enthusiast who notes that in Massachusetts the medical devices industry has 24,000 employees and accounts for 13 percent of the state’s exports. Warren is experiencing another episode of New England remorse: “When Congress taxes the sale of a specific product through an excise tax … it too often disproportionately impacts the small companies with the narrowest financial margins and the broadest innovative potential.”