Raise a Glass to a Dumb Medical Device Tax Brewed in D.C.

Consumers, not companies, will foot the medical device excise tax

Mon, 03/11/2013 - 13:07

A prominent politician goes before his constituents during a tough reelection campaign. He’s introduced by the local mayor, and strides to the stage, waving and smiling to enthusiastic applause.

“It’s great to be here with you tonight. I love this great state of [fill in the blank]. Erica and I miss being here, especially when we’re stuck in that snake pit called Washington, D.C.”

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The crowd laughs, and the esteemed incumbent goes on. “Now, as you know, we’ve got to find new ways to pay for Obamacare. Well, I’ve got a great one: A brand-new 2.3 percent consumer tax on medical devices.” The crowd gasps.

What are his reelection chances now?

Well, that’s what happened in Washington in 2010. In this instance, we can’t focus on a single lawmaker, but a gaggle have gotten together and imposed a new medical device excise tax (MEDT) on medical device manufacturers.

So far, so good. Medical device manufactures should pay more taxes, many citizens would agree.

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Comments

Companies generally set their prices to maximize revenue. If they could raise their prices without negative consequence then they already would have. It is more likely the tax will be paid by the company in the form of lower profits or lower dividends (if they pay them) or lower executive compensation; or some combination of those.

It is understandable that these guys are upset. Nobody likes paying a new tax. But the whining is really a bit much. They should be happy they are not tanning salon operators. Plus if Obamacare is reasonably successful, there will be many millions of newly insured people who will be new consumers for their products. 

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