One major defect among many in the Affordable Care Act (Obamacare) is the provision of the law which institutes an excise tax on medical device manufacturers. Totaling a paltry $29 billion (in relation to what Obamacare will cost overall) over the next decade, the purpose of the new tax is to finance some of the subsidies the federal government will pay to expand Medicaid coverage to the uninsured.
Now on the surface, this sounds like an admirable goal, namely, providing health care coverage for those who can’t afford it on their own. But upon closer inspection, this is another example of what the famous French political economist Frederic Bastiat wrote about in his 1850 essay, "Ce qu'on voit et ce qu'on ne voit pas" ("What is Seen and What is Unseen").
While the president and other advocates of Obamacare boast that they will expand coverage for more Americans through provisions like the medical-device excise tax, they fail to realize or refuse to acknowledge that other Americans will lose their jobs on account of the same provision.
Last year, a survey conducted by the Massachusetts Medical Device Industry Council (MassMEDIC) found that 25% of the companies surveyed indicated they would reduce their domestic workforce in reaction to the new tax. Another 25% percent said they would outsource manufacturing to lower-cost areas outside the U.S.
To be sure, companies do not move their operations overseas without careful consideration. It is expensive and even risky for them to relocate all or the bulk of their workforce outside the United States. There are a lot of costs involved with moving facilities and setting up shop abroad. Corruption, political instability, and unskilled labor forces in most developing countries provide an enormous amount of risk for American companies. Yet many of them make the move anyway, and that is the question which has baffled Obama and his ilk for some time now. Why have American companies and the jobs they provide gone overseas these last several decades? The answer is simple: Because the money saved in taxes, many times in the hundreds of millions of dollars annually, more than compensates them for their relocations abroad. It seems the medical-device excise tax will continue that trend.