Tax buried in Obama health-care plan will kill 43,000 jobs, warns economic report from medical equipment lobby

Neil Munro White House Correspondent
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The president’s health care overhaul includes a 2.3 percent excise tax on medical devices that will send the durable medical equipment industry into intensive care, eliminate 43,000 jobs, and whack $3.5 billion from local shops and communities, according to a new study by two free market economists.

The 30-page report, released on Wednesday by the Advanced Medical Technology Association, a trade group, also concludes that the tax on medical equipment may prompt the closure of high-tech research facilities in several states.

That trade group released its report predicting massive job losses, just one day before President Obama is scheduled to present a new job-creation plan to a joint session of Congress on Thursday evening.

“The new 2.3% excise tax will roughly double the device industry’s total tax bill,” wrote Harold and Diana Furchtgott-Roth, “and raise the average effective corporate income tax rate to one the highest effective tax rates faced by any industry in the world.” They also wrote that the tax will be paid by companies that are already losing money.

Diana Furchtgott-Roth was chief economist at the U.S. Department of Labor from 2003 to 2005, and now works at the Manhattan Institute. Harold Furchtgott-Roth was a commissioner at the Federal Communications Commission and the chief economist at the House commerce committee.

The high-tech medical device sector makes surgical devices, such as pacemakers and stents, as well as products for use by surgeons. The sector employed roughly 400,000 people and produced $116 billion worth of products in 2009. The Furchtgott-Roths’ report projects an 11-percent job loss across the industry. (RELATED: GOP senators to Obama: Stop hurting job creation, send trade deals to Congress)

The new tax is expected to generate $20 billion for the federal government from 2013 to 2019. It was imposed as a revenue stream within Obama’s 2010 health care law, which establishes indirect federal control over much of the nation’s health sector.

The industry’s leading executives tend to lean Democratic, and are reluctant to publicly oppose Democrats in the federal government, an industry advocate told The Daily Caller.

That’s partly because many of the leading companies are located in Democratic-dominated areas, such as the Boston and San Francisco metro regions. But it is also in part because the industry’s executives are trained and socialized at Democratic-dominated universities, the lobbyist said.

To plead their case in the administration, the AdvaMed group recently hired a new advocate, Duane Wright, who was a vice-president at the Democratic-heavy Glover Park Group lobbying firm. Before he worked there, Wright was a staffer for a Democratic Senator and a Democratic Representative.

The tax will have its greatest impact in states with large slices of the medical device industry, including California, Florida, Illinois, Indiana, Massachusetts, Minnesota, New Jersey, New York, Ohio, Pennsylvania, Texas, and Wisconsin, said the report.

To increase its political impact, the AdvaMed group produced a 2010 report tallying its value in those states, For example, the industry employs roughly 8,400 Americans — with a payroll of roughly $425 million — in North Carolina, where the Democrats plan to hold their 2012 convention.

The new report says North Carolina could lose almost 900 jobs and about $70 million in local payments. California could lose 8,500 jobs and $700 million in local payments, said the report.

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Neil Munro