 Tom Grasson |
I can remember my father saying: “There are only two certainties in this life – taxes and death.” It’s been more than four decades since my dad died, but his words of wisdom become clearer and clearer with each passing day. While I can’t be sure where he picked up this saying, I do know that he never envisioned a Congress that could enact a tax and put a key manufacturing sector to death all at the same time. Yet, this is precisely the road we’re going down if the device tax on med-tech firms is passed. From its introduction, this tax bill has been a fool’s errand and, it seems, the more Congress tries to justify it the less sense it makes. A recently proposed amendment to this bill calls for a $20 billion tax on medical device companies to help pay for healthcare reform, down from the originally proposed $40 billion. So, to make it more palatable, device companies with annual revenues below $100 million would be exempt from the tax. In addition, the amendment calls for the tax to take effect in 2013 not 2010. It is absolutely absurd to think that placing a tax on medical device companies will lower healthcare costs. First of all, this tax will be based on sales revenues. This, in turn, would certainly make a strong argument for considering off-shore manufacturing which is counter-intuitive to the real problem – solving the unemployment situation. Furthermore, anyone who thinks that medical device R&D will not be hindered is badly mistaken. Adding salt to the wound, these taxes will eventually find their way back to us through higher costs passed on to doctors, hospitals, and insurance companies. Additionally, the thought process that went into having the tax take place in 2013, not 2010, is nothing more than a smoke screen. A post on StarTribune.com, made by the president and CEO of AdvaMed, saying that a later start date would give companies time to prepare for the tax, avoid putting an additional burden on the industry during difficult economic times, and make the timing of the tax more consistent with the timing of expanded coverage, is a hard pill to swallow. All it does is delay the inevitable; instead of killing the medical device industry this year, the delay grants a three-year stay-of-execution. This AdvaMed executive further states that this amendment will help protect smaller companies who are often the drivers of both innovation and employment. I don’t believe protect is the right word here. It would be more accurate to say stymie. While exempting medical device companies with annual sales revenue below $100 million may help today, tomorrow is another story. I agree that these companies are often the drivers of both innovation and employment, but the incentive for them to grow will be taken away if this tax is passed into law. Increasing sales revenues to generate more profits in order to expand R&D efforts and create new jobs would be a futile endeavor. Poll after poll indicates that U.S. citizens prefer the American system of free markets and individual responsibility to the European-style welfare state. However, our lawmakers don’t seem to care or understand what the majority of Americans are crying for. For some reason, these lawmakers feel that they need to make all the decisions for the citizens of this country, even if it is not what their constituents want. Perhaps it is arrogance; then again, it may be incompetence. I hear people hammering for jobs and tax cuts. Passing this tax into law will do neither. All this tax will do is increase medical device costs, cut R&D, eliminate jobs, and lead to off-shore production. In my opinion, this is political malpractice at its finest.  tgrasson@gie.net |
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