Sunday, September 13, 2009


Tigerhawk has an important post up today that relates to his own medical area of expertise. The Senate Finance Committee has proposed a massive new tax on medical devices, without regard to a company's profitability. It will destroy innovation by crushing the rate of return on capital invested in new med tech. There will be fewer new inventions as a result, and we all will suffer:
As we have long predicted on this blog, the health care "reformers" propose to finance at least part of the "savings" or new benefits -- it is impossible to know which -- by decreasing the rate of return on medical technology. There are many ways in which this might be done, but the Senate Democrats are proposing to do so directly, by levying a "value added tax" on medical device companies according to their proportion of U.S. sales. This tax would be without regard to profitability, so it would amount to a capital tax on start-ups and a massive income tax surcharge on profitable companies, varying as net margins do. In the case of my own mid-sized company, the tax would be the equivalent of a roughly 20% surcharge on our net income (in all likelihood raising our economic tax rate well above 50%) or 50% of our research and development budget, depending on how you want to look at it.

Any way you look at it, the proposed tax is a calculated effort to divert capital from the medical technology industry to other uses in the economy, because new medical technology drives costs that are now going to be assumed by the government (or at least will be if the Senate leadership gets its way). Of course, innovative medtech also extends and saves lives, and makes them more comfortable and more productive. Which is, after all, the point of medicine.

Go and read it all. Obama and the Democrats are not going to be happy until they suffocate the life out of the free market.

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