Obamacare Medical device tax
Updated: Saturday, August 3 2013, 02:33 PM CDT
WASTE WATCH: The most controversial of the latest Obamacare taxes is the medical device tax that hits businesses making equipment like heart valves and hip replacement parts.
They face a tax on gross sales a tax they must pay even if they have no profit at all.
It's a hit that could have a dangerous impact on these firms the jobs they create and our health.
The medical device industry employs more than 400,000 people in 12,000 factories across the country.
These are often small companies with a small product line.
Companies now facing a tax that many say may force them to relocate abroad to survive taking much-needed, high-tech jobs with them.
These lost jobs will be more health care casualties and this tax means that medical devices will be more expensive driving health costs even higher.
Medical devices save lives or make our lives better every day.
The United States is the global leader in medical device innovation and it is one of the few major industries that is a job-creator.
But all of that is in jeopardy.
Companies like Pensacola's Actigraph which makes a device that measures energy expenditure, are facing a 2.3% excise tax through the Affordable Care Act.
This tax is especially devastating because it is assessed on sales not profits.
"Anyone who is a medical manufacturer is faced with a couple of things. One would be downsizing to cover that cost, where we may have been looking for expand and add employees. But potentially more devastating would be taking our manufacturing offshore. Because if we manufacture offshore, we wouldn't be subject to that tax."
A manufacturer of medical devices with a profit of $100,000 on sales of $1 million after all the costs and expenses will pay 23,000 in tax, wiping out almost a quarter of the profits.
Actigraph has been around since 2004 growing from four to 30 employees with plans to add more local jobs in the future.
Right now, everything is manufactured in the US but 60 % of Actigraph's business is in Europe and other foreign markets.
This tax makes it tough to stay local.
Jeff Arnett/President, Actigraph
"100 % of our market, only 40 % is in the US. So we're taxed on 100 % of what we sell and manufacture. So if we move it offshore, we could get around that tax. And I think that's what a lot of manufacturers are trying to weigh. They don't want to move it, but they may be forced to."
There could be other serious side affects from the medical devices tax.
Companies could cut back on research and development the lifeblood of innovation.
Life-saving or life-enhancing equipment may not be produced at all...Or the production could be delayed.
And as with any tax on business...The added costs are eventually passed along through price increases.
Luke Bowman/Opposes Medical Device Tax
"My wife and I, we don't make a whole lot of money. So obviously any increase is going to hurt our bottom line. However, I mean obviously whenever a company has an extra fee they'er going to pass it on to us."
Charlie Brower/Opposes Medical Device Tax
"When the small businesses get hit people are going to lose their jobs. They're only going to be working 30 hours a week, and it's really going to hurt a lot of people. That's why I'm against it. The whole thing was wrong from the beginning."
Why was this tax implemented if it has so many drawbacks?
Simply put the tax is necessary to pay for the increased cost of the new, government mandated health care system.
One cannot add millions of individuals to the medical rolls without finding some means of financing those increased costs.
The medical devices tax is one of the ways of doing that.
If you have an idea for a government spending report visit weartv.com and click on Waste Watch to tell us about it.