'Taxmageddon' isn't only about the half-trillion-dollar blow to the economy that arrives in 2013 on the end of the Bush-Obama tax rates. Several of the Affordable Care Act's worst tax increases kick in too, such as the new excise tax on medical devices.
The 2.3% levy applies to the sale of everything from cardiac defibrillators to artificial joints to MRI scanners. The device tax is supposed to raise $28.5 billion from 2013 to 2022, and it is especially harmful because it applies to gross sales, not profits. Companies at make-or-break margins could be taxed out of existence, especially in an intensely competitive industry where four of five businesses are start-ups or midsized.
As even the liberal papoose Elizabeth Warren recently put it, the device tax "disproportionately impacts the small companies with the narrowest financial margins and the broadest innovative potential."
Yet this very dynamism is what led Democrats to target the industry. As part of writing ObamaCare, they decided that all "stakeholders" should contribute something, but changes to the ordinary corporate tax code wouldn't raise enough money and would have hit many other innocent bystanders in manufacturing. So they chose an excise tax. About the only exemptions are for things that retail consumers buy directly, such as contact lenses or hearing aids.
So for the first time ever, the Internal Revenue Service is now writing rules that will treat some of medicine's most inventive and complex products the same way it does gas, cigarettes, liquor and wine, guns, airline tickets and tires. Those are the commodities on which the political class normally attaches excise taxes, and the appeal is that the levies are hidden in higher prices, rather than listed separately like a sales tax. This is somewhat awkward for a law that claims to aspire to make health care more "affordable."
The device tax is also worse than advertised because it won't apply to actual sale prices. The industry's supply chains and distribution networks are idiosyncratic, but different buyers usually pay different prices due to rebates and discounts. The draft IRS rules don't credit these common business practices and instead apply to the "highest price for which such articles are sold to distributors in the ordinary course of trade" or the "normal method of sales," as if there is a normal method. So the tax will be assessed on income that device makers never earn....
All of this is done in the hopes that voters will think Democrats are being generous with government services and therefore support them and their ruse in the future. I recently had to acquire a BIPAP device used for treating sleep apnea. It would have cost at least $150 more if this tax was applied. So why are they calling it the Affordable Care Act? It appears to be a case of the politics of fraud. I am sure there are many more expensive devices that patients need that will be less affordable as a result of health care monstrosity. Hopefully the Supreme Court will save us the trouble and increased expense.
Comments
Post a Comment