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.
Problem is, this new tax on companies is going to be passed straight to consumers, according to surveys and even actions by many device companies. A new website created by the Health Supply Chain Association (HCSA), lists a (growing?) number of companies apparently on record saying they will dump the MDET on their customers.
This unintended consequence comes on the heels of a new survey from Emergo Group, which finds 64 percent of medical devices companies believing the MDET will be harmful to their business. Given that many companies will let customers foot the bill, it sounds like they are more afraid it will hurt sales—and maybe their PR reputations.
Emergo got survey responses back from 667 senior execs of medical device companies, mostly in the United States and Canada, telling how they’d handle the MDET. Nearly 42 percent said they’d pass it on to consumers; 10 percent said they’d reduce staff because of the MDET, according to Emergo’s “Outlook for the Medical Device Industry in 2013″ survey.
Prohibition, which made alcoholic beverages illegal in the United States, began in 1920. The idea was to lead the nation to a higher moral ground by removing demon rum and the other evil drinks.
How’d that work out? Our wise friend, historian Ken Burns via PBS, tells us, “The unintended consequences proved to be a decline in amusement and entertainment industries across the board. Restaurants failed, as they could no longer make a profit without legal liquor sales. Theater revenues declined rather than increase, and few of the other economic benefits that had been predicted came to pass.
Sound familiar? Well, at least today we can legally raise a glass filled with our favorite beverage and toast another great idea not thought through by lawmakers in D.C.
This article was first published March 6, 2013, on the AssurX website.
Comments
Consumers paying is the least likely outcome
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.
What?
Andrew,
What country are you from? Of course the consumer will be paying for this new tax.
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