Posted: 01/27/16 03:57
by Dave Mindeman
MinnPost published an extensive, balanced article on the Medical Device Tax issues. It is worth the read.
But there are some points that keep getting brought up that lack clarity.
For instance, the Medical Device industry's claims about how it hurts the device makers and their workers....
But are any of those doom-and-gloom claims true? For observers in the policy world, and for fact-checkers in the media, tales of major job loss and stifled innovation in the medical device industry don't add up.
Here is a statement that looks skeptical...
In interviews and statements to MinnPost, Paulsen and Klobuchar recalled hearing constantly from business owners that the medical-device tax ended up preventing them from hiring more people and researching new technologies. "What the device tax means to the community," Paulsen says, "is, you have two fewer projects, a couple less engineers, borrowing from banks to pay off the tax."
Notice how there is no evidence offered. They heard about the problem, but from who? The medical device owners themselves. Paulsen only regurgitates what they tell them - a mouthpiece for the industry.
How about the threats to jobs?
The nonpartisan Factcheck.org examined job-loss claims made by the industry's boosters in Congress -- such as Paulsen's 33,000 figure -- and found that these numbers were exaggerated thanks to overly generous math on the part of the industry's advocates. (Much existing research comes from AdvaMed, the industry's official trade group in Washington.) As of October 2013, Factcheck's analysts found that perhaps 9,000 jobs in the sector -- at the very most -- have been lost due to the tax.
That actual number of job losses could very easily be the result of all the mergers and acquisitions that are taking place in the industry. And even these numbers may be a stretch.
Beyond that, a Washington Post article fact-checking the claims of Paulsen and others also found holes in their claims. It cited a January 2014 survey in which about nine percent of U.S. medical device firm managers said they did not have to lay anyone off because the tax; fully half of the respondents said they didn't change how they did business at all as a result of the tax.
What about claims that investors are scared away by the tax?
Recent numbers show that, on the whole, Minnesota firms are doing just fine. According to Medical Alley, 2015 was a record year for investing: Minnesota firms raked in a total of $434 million in investment dollars, a seven-year high.
There is really only one legitimate claim that can be made from the industry about the tax. It is a drawback for start ups and research oriented firms that operate in the red for several years before any breakthroughs. But I fail to understand why these companies cannot be granted exemptions in that regard.
The continuing problem is that the device tax is a component of the Obamacare funding mechanism. Republicans are concerned about the deficit and the debt, yet when the device tax repeal is brought to the floor, there is never any replacement funding suggested. The successful 2 year repeal does not offer any revenue stream as replacement and I guess that there will be some Congressional slight of hand performed to fix that.
The industry has been enormously profitable, but as in the rest of the economy, the rich get richer....
The GAO studied 102 medical device firms, from large companies (including Medtronic and St. Jude) to mid-sized and small firms. Overall, the audit found that from 2005 to 2014, medical device companies' profits increased by 43 percent, even through the difficult recession years.
That prosperity wasn't spread evenly, however: the 30 biggest companies accounted for 95 percent of net sales annually, and the smallest 37 accounted for one percent of that total.
But I can imagine you will figure out who contributes the largest portion of Congressional lobbyist money. Most of it comes from the top 5 companies... and Medtronic, the Irish inversion company, had their fair share.... they can afford it with $13.9 billion in profits last year.
Nobody in the Minnesota Congressional delegation questions the industry. They are strong Minnesota companies and our representatives feel compelled to do their bidding.
It is no wonder that we cannot balance a budget in this country - the corporate trough cannot be ignored.