Commentary: ‘Device tax’ will cost money, jobs … and lives

Not only will the so-called “device tax” — on exotic medical devices made by several prominent Twin Cities companies cost crippling amounts of money and jobs, but according to one CEO, it’ll … cost lives, too. Says Dale Wallstrom in a Strib commentary: “The medical device industry is one of the few of our country’s great industries left with a positive trade balance ($3 billion in 2010). Anchored in Minnesota, it is an innovative industry with opportunities for growth; more than 80 percent of U.S. device companies have fewer than 50 employees; 98 percent have fewer than 500. … The impact of the industry in Minnesota was more than $34 billion in 2009. It directly employs more than 35,000 people, and indirectly employs approximately 160,000 Minnesotans …. Yet despite the public health value and economic impact of the industry, its ability to innovate and operate is under attack. Our federal government has targeted the industry through the Affordable Care Act by including a 2.3 percent excise tax on medical devices. Estimates predict that this tax will raise about $29 billion over the next 10 years. One-quarter of this tax will come directly from Minnesota companies, extracting $5 billion to $8 billion from our state’s economy.” A 2.3 percent tax is an attack?

Tom Meersman of the Strib has a cool story: “Fourteen years ago, straight-line winds blasted through the Chaska area, downing trees and power lines and damaging roofs. On the Gedney Pickle factory’s property, a huge eagle nest with two eaglets crashed 60 feet to the ground. One of the six-week-old eaglets died but volunteers quickly created a makeshift nest out of a massive fan screen, hauled it up the tree and returned the surviving eaglet to the man made nest. Until last month, the rescue team didn’t know what ultimately became of the eaglet. But that mystery has been solved, thanks to a curious wildlife photographer in St. Peter, Minn.”

Here’s a story for the Lifetime Channel. Abby Simons of the Strib reports: “In a lawsuit filed last week in Hennepin County District Court, Jeffery Wolfsberg, 46, claims that William and Roberta Wheeler of Minnetonka conspired to ruin his business and reputation, which caused the recovering addict to relapse, and also destroyed his marriage. The lawsuit accuses the Wheelers of defamation, invasion of privacy, emotional distress and interference with a business contract. It seeks at least $50,000 in damages. Wolfsberg ran seminars and spoke to teenagers nationwide for 16 years about the dangers of drug and alcohol use. Blake [school] severed ties with him when they learned of his relationship with their student; other schools around the country did the same. … Wolfsberg and the student met at a Minneapolis hotel room last September, prompting Blake officials to send a letter to students and parents describing the incident. The school added that Wolfsberg had violated the school’s standards and his own ethical code, even if nothing sexual happened. In his suit, Wolfsberg maintains that his relationship with the student was not inappropriate and that he was a voice of support when she was troubled.” Not to presume anything, but isn’t this what public parks and coffee shops are for?

What, no rhino horn powder? Asha Anchan of the Strib writes: “The item sold on eBay as a “Chinese plastic carved lady statue and wood base,” but federal investigators say what a Roseville resident really sold was illegal ivory. Minghao Hou is now the subject of a inquiry into the trafficking of ivory, decades after it became illegal. Hou has not yet been charged, but his home has been searched, turning up 26 elephant ivory carvings.”

At the PiPress, Julio Ojeda-Zapata checks out Verizon’s new “Share Everything” pricing plan: “Joey White of Burnsville calls himself a “power user” of wireless data via his carrier, Verizon. He has paid $30 a month to get unlimited data on his Android smartphone for a while. So recent, drastic changes to how Verizon sells its wireless services — including data, voice and texts — have angered White. The reason: Verizon has made it far more difficult, if not impossible, for him to retain his beloved bottomless bucket of bandwidth. White isn’t the only one crying foul. Verizon has received plenty of criticism in the two days since its announcement — unfair criticism, the carrier insists. This controversy revolves around Share Everything, which is a radical rethinking of the classic cellular contract. Under such a plan, Verizon has made it easier to buy voice minutes and texts, both unlimited. … The catch: No unlimited-data option is available. In fact, this has not been an option for a while, but those who subscribed to these plans in the past, as White did, have been able to continue using them. Yet Verizon, like other carriers, is keen to do away with such offerings and replace them with a tiered selection of data-capped options for everyone.”

Remember the West St. Paul council member who got in trouble for flying a Confederate flag? He’s back in the kettle. Nick Ferraro of the PiPress says: “[Ed] Hansen is facing accusations that he has taken his free speech too far. The city received two complaints this month regarding Hansen’s behavior outside his home. One incident, described by West St. Paul Police Chief Bud Shaver as a “verbal dispute,” will be investigated to see if a crime was committed. On Monday, June 11, a real-estate agent visiting a foreclosed property next to Hansen’s filed the complaint with West St. Paul police over the dispute she had with Hansen, a first-term council member elected in 2010. … The other complaint involves the developer who currently is building one house next to Hansen’s through an agreement with the city’s Economic Development Authority. Hansen has been opposed to the project from the get-go. About two weeks ago, developer Jay Brunn called City Council Member Ed Iago to complain about how Hansen put three Confederate flags outside his house and two in his windows. In February, Hansen defended his right to fly a Confederate flag off the back porch of his home.” By now isn’t “first term … elected in 2010” a well-understood code?

Financial disclosure forms are always full of interesting details. The AP reports: “Wisconsin’s Republican congressmen are apparently wealthier than their three Democratic counterparts, according to the lawmakers’ recently released financial-disclosure reports. … two Republicans, U.S. Reps. James Sensenbrenner and Sean Duffy, were granted extensions and haven’t filed their latest forms yet. But of the six reports that have been filed, one trend is apparent — the Republicans have more money. The three other Republican congressmen — U.S. Reps. Thomas Petri, Paul Ryan and Reid Ribble — each reported assets worth at least $1.7 million. No Democrat reported more than $1.6 million in assets, and one, Milwaukee Democrat Gwen Moore, indicated she had no reportable assets. … Petri topped Wisconsin’s list with assets worth between $10.8 million and $46 million. After subtracting liabilities, the Fond du Lac Republican had a net worth between about $5 million and $45 million.”

Those locked-out American Crystal Sugar workers up in the Red River Valley will take another vote on a contract. Jon Collins of MPR writes: “[T]he contract is essentially the same as the one union members rejected on Nov. 1, which the union said undermined job security. American Crystal Sugar rejected a counter-proposal from the union last week. Union leadership is not taking a stance on the vote, which requires a majority for approval. Representatives for the company have said they are preparing to hire new workers for the upcoming sugar-processing season.”

The PiPress surveyed most of the Twin Cities’ big corporations on their official position vis a vis the so-called gay marriage amendment. A couple of samples:
“Best Buy: ‘Right now Best Buy is solely focused on turning around our business and charting our future. Part of that effort includes creating an employee experience that celebrates diversity and inclusion, and we remain strongly committed to LGBT workplace equality.’
Cargill: ‘As an organization committed to a diverse workforce, Cargill works hard to attract, develop and retain top talent. While we are not taking a public position on the Minnesota same sex marriage Constitutional amendment at this time, it is important to underscore that Cargill nurtures an open and respectful workplace.’
Target: ‘We are proud of Target’s strong record on inclusivity and diversity in every aspect of our business, and have a long history of supporting the LGBT community through giving, volunteerism and event sponsorship. We will continue to build on this record by strengthening our support for policies and programs that encourage diversity in the workplace. We recognize that there is a broad range of strongly held views on the MN Marriage amendment. While Target has not taken a role in the public debate on this issue, consistent with our longstanding support of civic engagement, we strongly encourage our team members to exercise their right to vote in November.’
… No response received: United HealthGroup, Hormel Foods, Land O’Lakes … Mosaic, Nash Finch, C.H. Robinson, Thrivent Financial for Lutherans.”

Comments (18)

  1. Submitted by Mark Gisleson on 06/15/2012 - 07:22 am.

    Sensenbrenner is widely known

    as the heir to the Kotex fortune. (They were invented by his grandfather who went on to be CEO of Kimberly Clark.)

  2. Submitted by John Eckberg on 06/15/2012 - 07:39 am.

    Medical Device Tax

    Hello, I am John Eckberg, the medica relations director for Cook Group, parent of Cook Medical, and yes, a 2.3 percent tax on gross sales is a big attack! Here’s why, when the sum that is gathered from a top line tax is applied to earnings or net income, it equals a 15 percent tax grab. When U.S. companies already pay a tax rate that crests at 35 percent for federal taxes, plus 8 percent for local taxes, then another 15 percent from this new tax, that means companies are paying more than 50 percent of every dollar earned in taxes. Look at the locations of the people who signed a cyber-petition at no2point3.com and tell me workers and companies are not terrified. This tax has to go. Patients are counting on breakthroughs, workers are counting on jobs and companies are counting in a vibrant future.

    • Submitted by Neal Rovick on 06/15/2012 - 08:03 am.

      So bottom line, what is your effective tax rate right now? Surely not 35%, because only rubes pay 35%. GE complains about taxes too, but pays little or no taxes.

      • Submitted by Tim Saxton on 06/15/2012 - 10:35 am.

        Why “only rubes”

        Why do we have tax codes with loopholes and more loopholes that require you to dig through more and more pages to find ways out of taxes… and of any company uses a loop hole they are screamed at for dodging taxes.

        And yes GE got out of paying taxes… they also donated heavily the current president when he was running and took advantage some new “green” loopholes put in place by said president.

        Not everybody has the funds to brib..er “donate” to president and lobby for loopholes, only the mega corporations. Taxes like this kill smaller businesses, and make it harder to start new businesses… kills innovation.

        We need massive tax reform. The tax code is 74,994 pages long. The IRS suggests we (including you) spend 35 hours each year doing taxes. We keep raising taxes (except add a loophole for those who brib..er..donate to party X), then we add more taxes to cover those loopholes when party Y comes into power (and add loopholes for those who brib..er..donate to party Y). Over and over again.

    • Submitted by Jim Camery on 06/15/2012 - 09:01 am.

      huh?

      Sorry, but your math doesn’t doesn’t work. And even if it did, if all manufacturers are operating with the same rules, there’s no real impact.

  3. Submitted by Dimitri Drekonja on 06/15/2012 - 08:52 am.

    Count me as another skeptic

    Mr Eckberg– could you enlighten us as to which medical device company is naive enough to pay a tax rate of over 50%?

    It’s not Medtronic: https://www.massdevice.com/news/irs-wants-medtronic-pay-958m-tax-tab

    “Medtronic paid income taxes at a rate of 16.8% in 2011, less than half of the standard federal rate of 35% for corporate income, by attributing much of its profits to a foreign facility, according to the news service.”

    It’s not Boston Scientific: http://articles.chicagotribune.com/2012-04-19/news/sns-rt-bostonscientific-update-2l2e8fj1jx-20120419_1_earnings-rise-boston-scientific-shares-shares-jump

    “Boston Scientific shares were up 5.6 percent to $5.85 in early trading Thursday on the New York Stock Exchange. JP Morgan analyst Michael Weinstein said the upside in first-quarter profit came from a tax rate of 9.8 percent versus the 17.0 percent that management had forecast.”

    It’s not St Jude: http://www.minnpost.com/business/2011/11/corporate-income-tax-study-sure-intensify-political-deficit-battle

    They are the closest: 37.5%. But during that period (2008-10) Medtronic was at 26.9%, which they got down to the impressive 16.8% the next year. So presumably St. Jude also wised up and found the same loopholes.

    Can you point to any device company that pays the rates you suggest (> 50%)? For the big 3 you’re off by 33.2%, 40.2%, and 12.5%. If you’re paying 50%, perhaps you need to work on leveling the playing field with these guys, vs. worrying about a 2.3% tax on all device companies. And of course, as Neal points out, all of these companies are suckers compared to GE. Sorry, but no tears here for corporate tax rates.

  4. Submitted by Dennis Tester on 06/15/2012 - 09:45 am.

    Rather than suggest that

    Cook Medical game the federal tax system because “only a rube” pays the full amount due, why don’t we simplify the tax code so that gaming it isn’t required in order to survive the greedy clutches of government?

    When a person or company’s actual tax liability is dependant on the slickness of their tax attorneys, it’s time to get a new system.

    In the meantime, he’s right. This tax law is anti-jobs and anti-business and would result in both going away if enacted. I don’t think it will though because help is on the way in November.

  5. Submitted by James Hamilton on 06/15/2012 - 10:27 am.

    It’s an excise tax, isn’t it?

    “An excise is considered an indirect tax, meaning that the producer or seller who pays the tax to the government is expected to try to recover the tax by raising the price paid by the buyer (that is, to shift or pass on the tax). Excises are typically imposed in addition to another indirect tax such as a sales tax or value added tax (VAT). In common terminology (but not necessarily in law) an excise is distinguished from a sales tax or VAT in three ways: (i) an excise typically applies to a narrower range of products; (ii) an excise is typically heavier, accounting for higher fractions (sometimes half or more) of the retail prices of the targeted products; and (iii) an excise is typically specific (so much per unit of measure; e.g. so many cents per gallon), whereas a sales tax or VAT is ad valorem, i.e. proportional to value (a percentage of the price in the case of a sales tax, or of value added in the case of a VAT).”

  6. Submitted by Matthew Levitt on 06/15/2012 - 11:14 am.

    2.3% = 15%

    Can someone explain that in plain English?

  7. Submitted by Paul Scott on 06/15/2012 - 11:45 am.

    “Breakthrough”

    I wish device makers would present their work in a less superheroic fashion. They make products for use in the health care market, an extraordinarily effective drain on the economy with little to show for itself in terms of health expectancies. The tax may be significant but their reluctance to be part of the solution puts them in a bad light. If the drug industry can afford to pay in, so can the device industry.

  8. Submitted by Dimitri Drekonja on 06/15/2012 - 11:47 am.

    tax code

    Yes, the tax code should be simplified. Of course, both parties have had simultaneous control of both chambers and the presidency in the last decade, and it hasn’t happened, so that should give us all an idea of how realistic that is.

    But frankly, that’s an issue that affects average citizens, who are doing our taxes with turbo-tax or a local accountant. It’s a pretty poor argument to raise regarding corporate taxes, since they have the means to create/buy them, and lobby to maintain them.

    The numbers seem to support this– I’m still waiting to hear which device company is saddled with a > 50% tax rate. Cook is privately held, so there are no numbers available that I can find. But, presumably the world’s largest privately held medical device maker can do as well as places like Medtronic and Guidant, who both have gotten their rates under 20%. Must be rough.

  9. Submitted by Ray Schoch on 06/15/2012 - 11:51 am.

    I almost agree…

    …with Mr. Tester. Not quite, but almost.

    I DO agree with his first two paragraphs. A straightforward tax code that didn’t reward the wealthy and the corporations who hire attorneys to work on nothing but taxes seems a fine thing to me. If the tax rate is ‘x’ percent, everyone in that cohort pays ‘x’ percent, no matter how many tax attorneys they hire. Indeed, when one’s tax liability depends upon the skills of one’s tax attorney, it’s time to get a new system.

    That said, I’ve still seen no evidence presented in a credible publication that shows a small-percentage increase in excise tax – or ANY kind of tax – will cause jobs to disappear. Jobs have very little to do with taxes, and very much to do with demand for the product or service being offered for sale. Aside from rhetorically, from people who call themselves “conservative,” I’ve not encountered in a credible print source any correlation between corporate tax rates and jobs. Even if correlation could be shown, it’s not the same thing as “causation.” Just because “a” happens before “b” doesn’t automatically mean that “a” CAUSED “b.”

    And it doesn’t hurt to keep in mind that Mr. Eckberg is a “medica [sic] relations director” for one of the affected manufacturers. Assuming that what he really meant to type was “media” rather than “medica,” “spin” comes pretty close to being Mr. Eckberg’s middle name, and his job is to make the Cook Group look as good, and remain as profitable, as is possible. He’s hardly an objective observer. In that context, it doesn’t matter whether a proposed tax increase is relevant or not, equitable or not, or good for the society as a whole. If it negatively affects the bottom line in the quarterly earnings report, it’s automatically bad.

  10. Submitted by Thomas Swift on 06/15/2012 - 12:37 pm.

    Anyone remember 3M?

    There was a little company that a couple of guys started in Northern Minnesota awhile back that grew into a multi-national giant. They built factories all over the state, hired tens of thousands of Minnesotans.

    But after a while, unreasonable union demands and increasing taxation wore down this company’s devotion to the state in which it was born. They started expanding to other states; states that had a more welcoming enviornment in which to do business. SD; ND; AL; TX; MS; IA all benefitted from the short sightedness of Minnesota’s misguided, left wing leadership.

    This company, named for the state in which we live, Minnesota Mining and Manufacturing Co. has not spent a single buck on new investments within it’s namesake state for more than 10 years.

    Are we writing the next chapter with Medtronic?

    • Submitted by Mark Gisleson on 06/16/2012 - 12:12 pm.

      I don’t think Medtronic

      is loading up our aquifers with toxic substances.

      3M had labor problems? I think what you mean to say is that 3M developed a serious attitude problem when the union stood up for workers who were being exposed to toxic chemicals. (I had clients who were in litigation for over ten years while 3M challenged every neurological symptom).

      3M owns this town and both newspapers are terrified of reporting on their environmental issues (but, if the news were more aggressive, I’m sure we’d be hearing about how the nasty liberal news media is driving business out of Minnesota).

      The right won’t be happy until every state looks like West Virginia, and every water supply has been polluted.

  11. Submitted by Gary Schwitzer on 06/15/2012 - 01:21 pm.

    Editorial makes outlandish claim about impact of medical devices

    I’ll leave the debate over the device tax to politicians and special interests. But this claim in the Strib commentary simply can’t go unaddressed and unchallenged:

    “Between 1980 and 2000, medical device technology slashed the death rate from heart disease by a stunning 50 percent and cut the death rate from stroke by 30 percent. As a result, life expectancy was extended by more than three years.”

    So I addressed it, at:

    http://www.healthnewsreview.org/2012/06/industry-editorial-makes-outlandish-claim-about-impact-of-medical-devices/

    My website is devoted to helping people critically analyze any claim from any source about medical interventions.

    Gary Schwitzer
    Publisher
    HealthNewsReview.org

  12. Submitted by Rosalind Kohls on 06/15/2012 - 02:07 pm.

    any tax matters, large or small

    Taxes do cause people to change their behavior. They make hiring decisions based on taxes, they decide where to live and place their businesses on taxes, and where to shop based on taxes. That’s why the Mall of America is a popular destination for people around the country. Minnesota doesn’t have a sales tax on clothing. Shoppers like that!

    • Submitted by Bill Gleason on 06/16/2012 - 05:43 pm.

      If tax matters, large or small, because it is an expense…

      Why wouldn’t folks buy from Amazon.com? Plane fare is not free.

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