The Manhattan Institute study said, “In 2009. the medical device industry provided well-paying jobs to more than 409,000 employees, who earned more than $33 billion in labor compensation. Under reasonable assumptions, the tax could result in job losses in excess 43,000 and employment compensation losses in excess of $3.5 billion.”
States with large employment in the medical device industry will be especially hard hit, from California to Florida. The tax will be particularly harmful to companies that “innovate and tend to suffer loses in the first years or when investing in research and development for a new product but would still be required to pay the tax,” the study said.
With the tax, manufacturers in this country “will be more likely to close plants in the United States and replace them with plants in foreign countries….U.S. leadership in this industry could be threatened.”
The excise tax “will substantially harm the American consumer, the medical device manufacturing industry, and workers in that industry.” The new tax will be applied “to all sales of a product before other forms of state and local taxes are applied.” The government has used excise taxes on gasoline to help build roads and applied “sin” taxes to alcohol and tobacco which the government was seeking to discourage. But this excise tax on medical devices is unique in that it is designed solely to raise revenue.
The industry is one of the healthier segments of manufacturing. Medical devices are distributed through wholesale distribution networks, the study explains, “which likely add an additional 34% or $39 billion to the value of medical devices.”
The study said, “Excise taxes are known to be inefficient.” They “not only distort economic decisions, but they affect all firms, whether they are profitable or not.” A company losing money will still owe the tax. A company might have a large market share, but no profits, in the years when research and development occurs. “Thus, the market share tax could be an unintentional tax on innovation.”
If 15 percent of the production of the industry “were to migrate offshore as a result of the excise tax, U.S. industry employment would decline between 63,000 and 85,000 while employment compensation” would drop between “$5 billion nd $7 billion,” the study said.
Unfortunately, as these findings indicate, the human toll of ObamaCare will be felt in more areas than one.
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