Three CEOs in my own industry decry the new tax on medical devices, one of the funding mechanisms for the Affordable Care Act. Because of the tax's structure, it amounts to a 30% federal tax increase on the industry. For my own company, the new tax essentially wipes out a year of earnings growth. Since that is not an acceptable answer for stockholders (who can always invest their money in some other industry), companies have reacted to the tax by cutting other expenses, which in our industry usually means employees. Surging regulation on the part of the United States government (from all corners) means that it is very difficult for most device companies to cut "general and administrative" expenses and cost of goods sold. That means that compensating savings will have to come from sales and marketing expense (challenging, because if revenues suffer then even more cuts are necessary) and product development. That is happening anyway, because governments all around the world have tremendously extended approval times for new medical technology that they fear will cost more and strain their budgets further, but the medical device tax will surely accelerate the decline.
The other consequence of the medical device tax is that it further shifts the competitive balance from small companies to multinationals. First, it is a tax on revenues, not profits, so its impact on a money-losing start-up is onerous. More small companies will fail because of the tax, and fewer new device companies will receive funding in the first place. We will have fewer great products in our dotage as a result.
Second, the tax is imposed only on sales in the United States, so big companies that typically do half or more of their business in the rest of the world will pay a substantially lower tax (as a proportion of their revenues) than small companies.
Unfortunately, it is often the small companies that do the best inventing.
Hammering the medical technology industry is bad policy, because in addition to helping hundreds of millions of patients around the world lead longer and more comfortable lives, our device companies have been one of the real success stories in the American economy. Both the industry's prosperity and our own well-being require innovation, which politicians the world over seem to take for granted. That is a mistake.