An Indiana-based medical equipment manufacturer says it's scrapping plans to open five new plants in the coming years because of a looming tax tied to President Obama's health care overhaul law.
Cook Medical claims the tax on medical devices, set to take effect next year, will cost the company roughly $20 million a year, cutting into money that would otherwise go toward expanding into new facilities over the next five years.
"In reality, we're not looking at the U.S. to build factories anymore as long as this tax is in place. We can't, to be competitive," he said.
The Affordable Care Act imposed a 2.3 percent tax on medical devices beginning in 2013. It is projected raise nearly $30 billion over the next decade.Why in the hell would you put a special tax on medical devices? The rule is 'Tax what you seek to discourage; subsidize what you seek to encourage.'
But the Cook Medical spokesman said the impact is greater than just a 2.3 percent uptick in taxes. He said the impact on actual earnings is another 15 percent, and he projected the company's total tax burden next year will rise to over 50 percent.
How much do you want to bet that the tax will raise far less than the $30 billion projected, precisely due to effects like this?
This is sad news, instead of opening other places where research on medical devices could be done, the companies would rather not open up because of the increase in the costings.
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