On Friday, the Internal Revenue Service announces the new tax rules for 2013 concerning tax rates whicha re set to rise to help pay for the Affordable Care Act, AKA Obamacare. As part of the law’s provisions to keep it revenue neutral, starting Jan. 1, investment income for individuals earning over $200,000 and households earning over $250,000 will be subject to a new 3.8 percent tax. Further, regular income above those thresholds will be hit with a .9 percent Medicare surtax. Medical device companies will also face a 2.3 percent tax on all revenue beginning also beginning January 1.
In a statement released concerning the tax, Rep. Tom Price said:
“This week, the Internal Revenue Service outlined which medical supplies and technologies will be subject to a tax. Now, everything from latex gloves to pacemakers will become more expensive and in some cases, more scarce. The tax on medical devices harms America’s ability to conduct the necessary research and development to maintain our global competitiveness, resulting in the loss of tens of thousands of jobs and fewer groundbreaking innovations in this field. With millions of Americans unemployed, this simply makes no sense.”
Medical device companies are arguing that the tax is actually much higher than it sounds because the tax is on gross revenue, not profits amounting to a true tax rate of greater than 15 percent on profits. The device makers are saying that the cost of the tax wil have to be passed on to consumers and therefore will dramatically increase the cost of medical care.
Critics of The Affordable Care act argue that the increased taxes being placed on the rich and the device companies are going to shatter the fragile economic recovery and in the long run cost jobs.
Stephen J. Ubl, president of the Advanced Medical Technology Association, said:
“While Washington talks about a fiscal cliff, this tax could push us off an innovation cliff, costing as many as 43,000 jobs and hurting the ability of medical technology companies to find tomorrow’s treatments and cures. It should be repealed.”
Defenders of the President’s signature healthcare bill say that the trade off for the device companies is that because there wil be millions more people added to the ranks of the insured that the boom in business will more than make up for the tax.
Do you think that President Obama’s health care plan will help or hurt the medical industry?