• The Bayh who cried wolf (1/2)

    Former Senator Evan Bayh wrote a September 27 Wall Street Journal op-ed which slammed the 2.3% excise tax on medical devices implemented within health reform. Bayh seems rather critical of the tax:

    Many U.S. device companies, in response, have already announced layoffs, canceled plans for domestic expansion and slashed research-and-development budgets….

    ….

    The hit will be severe. For a typical company, a 2.3% tax on revenues equals a 15% tax on profits….  Many marginally profitable businesses will then hemorrhage red ink, since they’ll have to pay the excise tax whether they are making money or not.

    As a result of the looming device tax, production is moving overseas, good jobs are going to Europe and Asia, and cutting-edge medical devices will now be produced elsewhere for import into the U.S.

    Bayh’s polemical title (“ObamaCare’s Tax Raid on Medical Devices”) the uncritical editorial venue, and his personal financial ties to the industry attracted instant liberal blogosphere ridicule. Jon Chait of New York magazine was characteristically scathing.

    You have to get to the very last line of Bayh’s op-ed… to read the crucial explanatory passage:

            Mr. Bayh, a Democrat, is a former governor and U.S. senator from Indiana. He is a partner at the McGuireWoods law firm, which represents several medical-device companies.

    O-oh! You don’t say! Is there any chance this latter fact has anything at all to do with Bayh’s sudden concern for this vital public policy issue?

    I share Chait’s disdain for prominent legislators such as Bayh who cash in their credentials to secure equally prominent roles as Washington lobbyists, attorneys, and influence-brokers.  The Wall Street Journal prominently identified Bayh as “a Democrat” presumably in the hope that his prior vote for health reform will lend greater credibility to Bayh’s essay. Party affiliation is just not relevant to such special-interest arguments. Lobbyists come in all shapes, sizes, and identified positions on the ideological spectrum.

    Still, Bayh raises a fair question. What about the substantive issues in-play here? Are we damaging this worthy industry by imposing a dedicated 2.3% tax?

    As I will note in my next post, I don’t think so….

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    • I can’t wait for your next post! I learn a lot here on The Incidental Economist.

    • “Party affiliation is just not relevant to such special-interest arguments. Lobbyists come in all shapes, sizes, and identified positions on the ideological spectrum.”

      Valid point. If I recall correctly, Elizabeth Warren (an actual liberal and ACA supporter) has come out strongly against the tax, likely because the medical device industry is big in Massachusetts. It is perhaps a little less corrupt than the financially-interested Bayh coming out against the tax, but still problematic.

    • So it’s just another ACA tax on consumers? “Given inelastic demand and a reasonably competitive industry, most of this tax will be passed on to patients and to payers.” Of course, only the 1% will pay. One wonders if your analyses would be different if you had experience in the private sector or worked in the real economy, or if they were even informed by a little modesty. Ask Evan Bayh, Jim Webb, and Erskine Bowles what the ACA has done for the Democratic Party.