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Author: fleg9bo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 740357  
Subject: Taxes not influencing behavior MDFLXVI Date: 10/3/2012 2:55 PM
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http://online.wsj.com/article/SB1000087239639044462010457801...

The Supreme Court decision in June upholding the Affordable Care Act leaves in place a tax on medical devices that threatens thousands of American jobs and our global competitiveness. It will also stifle critical medical innovation in the industry that gave us defibrillators, pacemakers, artificial joints, stents, chemotherapy delivery systems and almost every device we depend on to save lives.

The 2.3% tax will be charged to manufacturers on each sale and takes effect in January. Many U.S. device companies, in response, have already announced layoffs, canceled plans for domestic expansion and slashed research-and-development budgets. This month, Welch Allyn—a maker of stethoscopes and blood-pressure cuffs—announced that it will lay off 10% of its global workforce over the next three years, but all of the jobs being cut are in the U.S.

A 2.3% tax on medical-device sales, not profits, was imposed under the theory that sales to medical-device companies would surge after patients newly insured by the Affordable Care Act poured into the system. What the industry lost in margins, it was supposed to make up in greater volume.

That calculation ignored the fact that the vast majority of medical-device consumers already are covered by Medicare, Medicaid or private insurance. So there will be little or no increase in sales volume to offset the added cost of $30 billion — according to the Congressional Budget Office — to the industry. This tax comes straight out of a company's bottom line. Because many devices are sold to hospitals, physicians and other providers through multiyear contracts, the prices are already locked in, so the tax cannot be passed on to the buyer.
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So the medical device industry is suddenly facing a $30 billion haircut. They deserve it, those greedy bastards.

--fleg
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