Obamacare and the Pandemic

If you want to force American companies to manufacture overseas, one way is to increase taxes on them. It’s not the only way, but it certainly works well.

At issue today is the medical device tax imposed by Obamacare. The program's architects decided that they could help pay for the program by increasing taxes on business.

Unfortunately, businesses responded by moving production overseas-- to China, for instance. Does the same principle apply to pharmaceuticals, nearly all of which are now produced outside of the country?

Anyway, Daniel John Sobieski explains it in The American Thinker. For the record, the opening paragraph is crying out for an editor. Be that as it may:

As lawmakers ponder ways to bring back U.S. manufacturing of pharmaceuticals, their raw materials, medical supplies, and devices, it must be remembered a major part of this problem which has come back to bite us was created by the Obama/Biden administration and the medical device tax that was included in ObamaCare that was supposed to defray the costs of this doomed-to-failure new entitlement program.

As part of the Orwellian-named Affordable Care Act, sales of medical devices from implants to MRIs, research equipment and surgical instruments were to bear a 2.3 percent tax. The tax would be on gross sales and not just profits. Even packaging, shipping, and warranties were included when calculating what was to be taxed.

The results were highly predictable:

Health care equipment manufacturers were not amused and there were predictions that this onerous tax on medical devices would for makers overseas and into the welcoming arms of China. As Bill Flax wrote in Forbes in October 2012:

Cook Medical, America’s largest privately-owned medical device manufacturer has been adamant that shrinking margins may force investment overseas. “Cook will no longer be able to expand our manufacturing in the United States,” said company spokeswoman Allison Giles. “We’ve always resisted going abroad” but due to diminished returns “decisions will have to be made.”

Cook scuttled plans for five additional plants across the Midwest. It expects the device tax could cost $30 million annually, roughly equivalent to constructing its new Canton, IL factory. Says the company, “that’s one less facility per year that we’re going to be able to use because of the tax.”

So, the tax was put on hiatus. But still, the threat remained:

Even when it was in hiatus, the Obama/Biden medical device tax hung over the medical device industry like the proverbial sword of Damocles. Outsourcing didn’t seem such a bad thing. As Rush Limbaugh has noted, liberal progressives like Obama and Biden employ a static analysis that says you can raise taxes and human and corporate behavior won’t change:

Do you all remember this thing called Obamacare? I’m sure you do. Do you remember the medical device tax that Obamacare instituted? Like all liberals, Obama believed that people that make things will pay anything. You put a tax on ’em, they’ll just keep paying the tax and they’ll just keep making the device. You put a tax on yachts, and people will pay the tax…

Well, guess what? The people that manufacture medical devices fled the USA, and they went overseas to various places to get ’em made. One of the places they went was China. They also went to Mexico. They went to places in Europe. And now people complain about a shortage. They want to chalk it up to somehow a fault or a deficiency of capitalism or of the United States. No siree, Bob. It was a by-product of a tax increase called Obamacare on medical devices.

It's just a footnote in the current crisis, but at least it tells us how to encourage business to move back onshore. And it tells us that it’s well past time that we repeal and replace Obamacare. But that would require us to note that the failure to do so lies at the feet of Congressional Republicans.