ObamaCare’s tax on prosthetic limbs and pacemakers

Grover Norquist President, Americans for Tax Reform
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There are 19 new tax hikes in the health care bill, which the Senate passed on Christmas Eve and Speaker Pelosi is trying to “deem” through the House on Sunday. Any one of these $500 billion in tax hikes could merit their own column—many have. There’s been a lot written on the “Cadillac plan excise tax,” the tax hikes associated with the individual and employer mandate, and even the tanning salon tax.

But one tax hike is especially important for some of the two-dozen swing Democrats in the House: a new tax on medical device manufacturers. The Senate bill contains a $2 billion annual tax on this sector (it starts in 2011, and rises to $3 billion in 2017). It will be assessed based on market share. There’s supposed to be an exemption for items which retail for less than $100, but it’s not at all clear how that would be administered. “Medical devices” include items such as prosthetics for wounded warriors, pacemakers, and other durable medical equipment. It goes without saying that the ultimate incidence of this tax will not be felt by the manufacturer (companies don’t pay taxes—people do), but by factory employees (lower wages and benefits), customers (higher prices), and shareholders (lower dividends and less capital gains).

The medical device manufacturing industry employs 360,000 workers in 6,000 plants around the country. Many of these worksites reside, coincidentally, in districts represented by Democrats undecided on ObamaCare. Americans for Tax Reform has compiled a database of sixteen swing districts with heavy medical device manufacturing employment. Of these, three undecided Democrats have major medical device manufacturers in their district. They would have to go home and explain voting for a tax increase, which could lead to pay cuts and pink slips.

Rep. Harry Mitchell represents the 5th District of Arizona. He voted for the House health care bill last fall, which means he’s already voted for a tax increase on medical device manufacturers. Cayenne Medical in Scottsdale, Ariz., employs 45 people. Sensys Medical in Chandler, Ariz., employs 40 workers. The average Arizonan working in the medical device industry earns $49,000 annually (compared to the state average of $34,000). In all, 4,500 Arizonans rely on the medical device industry for a paycheck.

Rep. Melissa Bean represents Illinois’ 8th District. She, too, voted for a tax increase on Illinois families by supporting the House health care bill in the fall. Fenwal Inc., in Round Lake, Ill., employs 3,500 workers. Nearly 10,000 people throughout the state of Illinois punch a clock every day in a medical manufacturing plant.

Rep. Jason Altmire (D) wisely voted against the House health care bill last fall, but the congressman from Pennsylvania’s 4th District is under intense pressure to switch to an “aye” this time. He would be unwise to do so, since Renal Solutions in his district’s Warrendale, Pa., employs 30-50 people depending on demand. A Pennsylvanian working for the medical device industry earns $44,000 per year, higher than the state average of $34,000.

The pattern is the same in all three cases. There is a clear danger that an industry-targeted tax hike will hurt an employer back home. Despite this, the three swing Congressmen are being pressured by President Obama and Speaker Pelosi to vote for this and 18 other tax hikes which will hurt working families.

This isn’t even the last tax hike that the House will consider on this aggrieved sector of our economy. Besides the medical device manufacturer tax hike from the fall and the Senate’s Christmas Eve health bill it will try to “deem as passed” this Sunday, there is yet a third tax hike on the House’s docket. At the same time as the House would send the Senate health care bill to the President’s desk, it would also vote for—you guessed it—a different tax hike on medical device manufacturers. This one would swap out the tax hike described above for a flat, 2.9 percent excise tax on industry sales.

The question for these Congressmen is very simple: are they with the people, or are they with the Washington establishment? Will they vote (in some cases, multiple times) to raise taxes on small and mid-size employers in their district to appease the big-city political machine politicians, Big Labor, and the trial bar? Or, will they do what the people of their district elected them to do—fight for them in the halls of Congress, no matter what a liberal Speaker from San Francisco or a President from Chicago pressure them to do?

Grover Norquist is president of Americans for Tax Reform.