Do Americans hate companies that produce hip replacements, insulin pumps and heart stents?
Apparently, the Obama administration does.
How else to explain the excise taxes imposed on these companies by the recent health-care bill.
The Congressional Budget Office estimates the cost of the new health care plan through 2020 at nearly $1 trillion. To help meet these costs, the government is imposing $107 billion in excise taxes on any health insurance, drug and medical-device company attempting to participate in America’s health-care industry.
The IRS will impose these excise taxes on gross revenue, not net income. So a company may be losing money but still must pay the tax.
In addition, these excise taxes are non-deductible. That means if a company owes $1 million in excise tax, it must make $1 million of pretax profit just to break even.
But wait. That $1 million pretax profit is taxable too! So this company will have to earn about $1.5 million of pretax profit to pay the income and excise taxes. Anything less will create a real loss.
For insurance companies, these excise taxes are just one component in the squeeze to drive them out of business. The plan’s designers want to push America into a single-payer system and replace what Obama sees as the cruel profit-driven insurance companies with warm-hearted, statistically driven, cost-cutting bureaucrats in Washington. (There will be no 800 number if you have a complaint.)
But do Americans hate the companies that provide medical devices? Do we want to drive them out of business, too?
What constitutes a medical device? It is not as simple as the medical deductions on your Schedule A. The tax will fall on bedpans, heart stents, crutches and bandages; eyeglasses, hearing aids, cotton swabs and condoms are exempt. A growing army of bureaucrats in Washington will work out further details.
It is clear what the health- care planners have in mind. These excise taxes will strip the profit out of these companies. They reveal the core philosophy of Barack Obama and the plan’s designers: Profit is bad; private enterprise is bad.
Americans used to think of this country as the land of equal opportunity, a nation that rewarded hard work and innovation. Accordingly, we created the highest standard of living the world has ever seen.
Now the strategy in Washington is: How much can the government confiscate of your productive effort and still keep you incentivized to work? Our nation is being transformed from the land of equal opportunity into the land of equal outcomes. Those outcomes will impoverish us all equally.
For years, the proponents of universal health care pointed to Europe as the model. Yet, as the European Union struggles to hold itself together, Europeans are showing us the way to drown in debt from entitlement programs. Greek workers are rioting to retain their privileges, while German workers rebel at working until age 67 to support Greeks retiring at 55.
What did our administration do in response to America’s rising financial difficulties? Against the will of the majority of Americans, it thrust the mother of all entitlement programs on us. I believe we all agree that health care is needed reform, but this legislation has put America’s financial house at risk. Our good intentions have set us on a path we cannot sustain.
Many of those who advocated for universal health care railed against America as a nation of the “haves” and the “have nots.” Ironically, that is exactly what the new health-care plan has set in stone — the wide gulf of a two-tiered system.
The privileged few who can afford to pay twice, once through taxes and again out-of-pocket, will enjoy the use of private doctors and hospitals. Meanwhile, the majority of us will experience the equality of the stand-in-line, you’re-too-old, the-system-can’t-afford-that, you’re-not-worth-the-cost system for the rest of us.
In their effort to turn America’s health care industry entirely into a public service sector, the designers of socialized medicine are hobbling the incentives to innovate and create new products to meet the needs of America’s health- care consumers. Eventually, they will figure this out.
When the health-insurance companies are out of business, and the drug and medical-device manufacturers have finally managed to convince Congress that the excise taxes are a bad idea, I wonder who will make up the $107 billion shortfall in revenue. Look out. It just might be you.
Joe Gruters is chairman of the Republican Party of Sarasota County.
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