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Anti-Tax Policy Sometimes Defies Logic - And Never Pays the Bill

Category: Economy
Posted: 06/05/12 01:17

by Dave Mindeman

I was channel surfing, waiting for the Twins game to start, when I came across the financial channel's Kudlow Report. Hosted by Larry Kudlow, this is a GOP propaganda show for the ages.

Generally I ignore his commentary but what caught my attention was that Kudlow was having a discussion about the mileage "tax" that both Minnesota and Oregon are considering. The mileage tax would have drivers pay a tax on miles traveled rather than gas consumed.

But Kudlow started ranting about this being another way for the state to gouge the consumer and adding to the commuter's tax burden. In fact, Kudlow didn't even get the idea that the mileage tax would replace the state gasoline tax. He was convinced that both would be assessed...even though his guests tried to assure him that this was not the case.

When he finally relented on that, he ranted about how the high price of gasoline was producing an added "tax" burden on the commuter as well. And again, Kudlow was under the mistaken impression that the gas tax was a percentage of gas purchased rather than the flat rate that is the reality. His guest tried to point out that gas taxes on the Federal level have not increased since 1993 and that if you adjust for inflation, we are paying less tax on gas now than we did 20 years ago.

But Kudlow was having none of it. He continued to rant about tax gouging through the rest of the program. Hey, why bother with facts.

But in a larger context, this "every tax is bad" mentality is really a large part of the reason for our large deficits. We want the services but have become convinced that we are under no obligation to pay for them.

Which brings me to Erik Paulsen and his plan to eliminate taxes on medical devices.....which is part of the Federal Health Care program.

Paulsen and several other in the Minnesota Congressional delegation (including Democrats) think this tax needs to be eliminated to protect Minnesota's medical device business. But Paulsen neglects to replace that funding and puts the ability of the new health care system to pay for its services in jeopardy. Of course, he doesn't care...he has not supported the Health Care bill anyway.

But the reality is that health care industries should help pay for the health care programs. In Minnesota, Minnesota Care gets a lot of its funding from the health care provider tax. Although health care providers keep fighting this funding source, it has been an excellent way to keep MNCARE solvent without adding an undue burden to the consumers. The 1 1/2 to 2% tax gets swallowed up in the billing process for the most part and has not been much of a burden to the system.

The Medical device tax would follow a similar pattern. Yet, Paulsen and his cohorts put claims of thousands of job layoffs in the industry....

.....Paulsen has tried to persuade members on both sides of the aisle about the tax. He calls it a job killer that will endanger 35,000 jobs in Minnesota and thousands more elsewhere.

There is no documentation to support that figure that I know of....there is better evidence of this:

Democrats justify the tax on the grounds that the health care law expands insurance coverage to 30 million people who were previously uninsured. With all those new patients, they say the already profitable device industry is likely to see demand for its products expand.

User fees (taxes) are an essential part of paying for services. If we don't utilize gas or mileage taxes for roads or medical taxes for medical services, how are we ever going to actually pay for anything?

When a plumber works on the pipes in your house, you pay him or her for their services. You don't consider it a unjust tax. You pay it because it covers a service you needed.

Why should government be any different? If we want everyone to have health care, then it has to be paid for. We can't continue to force hospitals and emergency rooms to provide health services for people who don't have insurance and then bill the rest of us.

Health care, roads, urban planning, sewers, power plants....it is all things we need.

But use a tax to pay for it and we can always find a Republican who will object.

Fix the deficit....pay the bills. It's that simple.

comments (1) permalink
06/05/12 07:42
Diana Furchtgott-Roth and Harold Furchtgott-Roth wrote the report ... that was paid for by the Medical Device industry.

Did anyone read the report ?
If so, then this statement should have caused a pause :
"It is impossible to predict exactly where losses in the medical device industry
would occur as a result of the excise tax."

Yet, they "suggest" a few possibilities:

Table 9 describes : "The tax would likely increase the after-tax prices to American consumers between .02% and 2.1% with most price increases around 1%.
Medical device demand would decline between $0.67 and $6.7 billion annually.
Industry employment should decline between 2,300 and 23,000."

Other possiblities :
"if 15% of production were to migrate offshore as a result of the excise tax, U.S. industry employment would decline between 63,000 and 85,000"
But if 30% of production were to migrate offshore as a result of the excise tax, U.S. industry employment would decline between 125,052 and 146,218

That all presumes that there is some loss of demand ... yet, with increased insurance coverage, isn't it more likely that demand will increase ? (Think about it ... you are a 50 year old whose high school football days are long behind and Medicare coverage is years away, would you be more likely to opt for a knee replacement surgery now if you had coverage through ObamaCare ?)

Further, even some members of the Medical Device industry acknowledge that it will have no impact on their business.

Somehow, the authors of the report conclude :
"Under reasonable assumptions, the tax could result in job losses in excess of 43,000 and employment compensation losses in excess of $3.5 billion."

IMO, the author's "Under reasonable assumptions" should be questioned.

Regarding Paulsen's claim of 35,000 jobs lost in the state, he must be using a domino type of counting as the report states that Minnesota's total employment for all Medical Device manufacturing (Table 6) is 24,825.

The reality is that the repeal impacts the national debt by $29.076 BILLION and Paulsen needs to identify some offset, otherwise it's just another example of corporate welfare.


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