The Affordable Care Act of 2010 includes a 2.3% tax on gross revenues from U.S. sales for devicemakers, and conservative analyst George F. Will says that, unless repealed, the charge will damage the industry's ability develop new technology and provide jobs around the country.
The tax on U.S. sales doesn't kick in until 2013, but Will, in a Washington Post editorial, claims it has already harmed device companies, which are cutting back to prepare for the hit. Boston Scientific ($BSX) is preparing for a $100 million charge next year in extra taxes, and Medtronic ($MDT) predicts it will lose $175 million against its 2013 earnings. And, in response, many companies are forced to cut jobs, Will says: Michigan's Stryker will shed 1,000, while Indiana's Zimmer will cut 450.
Supporters of the provision have said that the effects of the Affordable Care Act will mitigate the pain of the tax by insuring more patients and increase the demand for devices. However, according to Will, the majority of newly insured Americans will be young and thus less likely to need stents, pacemakers and artificial joints, forcing device companies to bear an unequal load with no payoff.
And, thus, the repeal movement: In the U.S. House of Representatives, 227 Republicans and 8 Democrats have co-sponsored a bill to strike the tax before it takes effect, and 23 Republican senators are on their side. It should come as no surprise that the tax is widely opposed within the industry, and the debate has trickled into the presidential campaign, with Mitt Romney voicing his opposition. States, too, have weighed in, with Minnesota and Massachusetts mobilizing to advocate a repeal.
- read Will's editorial in the Post