Unseen To The Naked Eye, Taxes Corrode

Taxes corrode. It's always nice to achieve a certain ends, but there's a consequence to an action. America is slowly destroying the one thing they have on everyone - bar none - and that's innovation. It's simple. You tax too much, people find ways around it. In the case of companies, they simply seek jurisdictions with more favorable tax rates. That can mean going to emerging countries like China, Brazil and India. Or they go to an Eastern European country seeking an edge. Or they can come to a place like Quebec where we can always use the business. And then the calls of ending outsourcing begins.

In Canada, by contrast, it was different. We didn't have as much at stake like the Americans. We weren't an economic powerhouse with many subtle realities Americans face. Nor were we, or are, overly innovative. We've become less so over time it can be argued. The only way innovation comes back is if government invites inventive companies here with a generous tax plan. Quebec does that all the time. Of course, that raises another pack of problems with leftists claiming preferential treatment for companies.Tax companies for our welfare! So the circle continues.

We should pay attention how Obamacare effects medical device companies and how they respond. After all, millions of North Americans rely on their innovations to provide quality products at prices the market can bear. My cousin, for example, owes his life to a defibrillator.

Interesting article at Medical Device Network by Thomas C. Novelli:

The concept of "shared responsibility" has continually been touted by Senator Max Baucus, a Democrat from Montana and chairman of the Senate Finance Committee, and other proponents of the tax as justification for implementing not only the device tax, but also a series of other taxes and cuts that will disproportionately affect a cross section of the healthcare industry.

The underlying premise of the concept is that the overall goal of healthcare reform, increasing health insurance coverage, will ultimately benefit healthcare industries. Thus, they must pay their fair share. While the idea of shared responsibility might have greater applicability for other areas affected by health reform legislation, it is more difficult to realise for the device industry.

A consistent argument used by supporters of the tax is that when there is an increased pool of newly insured beneficiaries, device companies will benefit from having an expanded customer and user base. However, this argument is shaky at best.

"A more important underlying consequence of the device tax is that it targets an industry producing truly innovative medical technologies."

Many of the devices that will be affected by the tax are used in the acute care setting, where patients, regardless of insurance, usually receive the appropriate medical treatment. As a result, it is highly unlikely that a product such as a defibrillator, which would be taxable under the House and Senate proposals, would receive any sort of increased benefit from a larger pool of insured beneficiaries.

It is also not the case that more people will be going into cardiac arrest and will need the assistance of a defibrillator. With this in mind, the purchasing practices of hospitals are likely to remain unchanged. This scenario would apply to numerous other medical technologies as well.

A more important underlying consequence of the device tax, however, is that it targets an industry producing truly innovative medical technologies. It is also an industry that is one of the few with a positive economic growth, despite a most challenging economic environment. At a time when the Federal government is working to promote investment in US industries of the future, it is inconsistent that a tax of this magnitude would be considered.

The US is the global leader in medical devices, which is one of the few industries with a net trade surplus. In addition, the US medical technology industry is responsible for nearly two million jobs, including some of the highest paying manufacturing positions in the country. Furthermore, the medical device industry is made up of mainly of small businesses. In fact, more than 80% employ fewer than 50 people.

 Just yet another piece showing concern with Obamacare is not an irrational process. In fact, it's a healthy one. And when the President goes around lampooning in Iowa the "sky didn't fall" rhetoric, he's not helping his cause. He's only showing how myopic he can be.