<p>Thats kind of my point. There are too many factors going on to confidently make any bottom line assessment on the effect of ACA on stock price. </p>
<p>The key expression is buy on rumor, sell on news. By the time ACA was signed everyone knew what was in it. Probably in mid 2009 investors knew single payer was out. </p>
<p>On the other hand since there was a recession, almost be definition equities, including heath care sector, were over sold. What happens after something is oversold- it recovers eventually. In this case it took multiple years. </p>
<p>There is too much going on to say “Ah ha! these 2/7 million subs chopped up between N many companies are pure profit to the insurers.” Thats my point.</p>
<p>Thank you for your very cogent post – that’s the point that I was trying to make by posting the actual statute (26 USC § 4191) which makes it clear that the taxable event for the medical device tax is the sale.</p>
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<p>Those who claim that the tax is “costing jobs” seem to be resting their argument on a false assertion that the tax is some sort of gross receipts or manufacturing tax that would be cut into profits and force the company offshore, but the statutory language is clear: the tax is due at point of sale to the purchaser, which would generally be a doctor or hospital, as the statute also exempts items “generally purchased by the general public at retail for individual use.”</p>
<p>Those who claim that this tax will not cost jobs and hinder innovation are quite ignorant of how business works and how the high paying manufacturing jobs have been leaving this country industry after industry.</p>
<p>However, ignorance about how business really operates is excusable and to be expected as we continue to lose our working class middle class jobs. These same people, in a few years, will be wondering why all the jobs are in southeast asia and mexico.</p>
<p>This will be a part of why. Once a company has a reason to look at offshoring, offshoring clearly becomes more attractive. If this were not the case, we would be manufacturing everything here, since we buy more than any other country in the world by orders of magnitude.</p>
<p>Poetgrl, I’m curious as to why you think the incidence of the medical devices tax (in other words, who actually pays it) would be the sellers. The textbook answer is, no matter whether the tax is nominally charged to the buyers (a sales tax) or the sellers (an excise tax), the one who pays is the one who is less price sensitive, whether that is buyer or seller. And I’m pretty sure that for medical devices, consumers are less price sensitive than manufacturers. </p>
<p>Is the hospital really going to say, well, we need a new MRI machine but the price just went up 2.3% so we’re not going to buy it? I don’t see that.</p>
<p>What I know is anectdotal, at this point and I’m not free to name the names of the companies, but there will be offshoring.</p>
<p>I’ve already been told an excise tax is not an excise tax for ad vomitum number of posts on this thread, when it clearly is one.</p>
<p>I think a tax like this should have been applied to everyone, but big pharma, of course, was exempt. I think, as usual, the littler guy is going to pay. Do I think it will cost jobs? I know it will. I know of one company that isn’t even going to make it because when you start a company, the margins are super slim. They will have to do what they can and sell to the bigger guy, and the bigger guy is going to offshore.</p>
<p>But, you know, it’s not in the statute, so I must be wrong. </p>
<p>I don’t think only one industry should have been singled out for taxes on sales, not profits, but sales. If others think this is “right,” and that it isn’t because they were smaller and less well connected than the “other guy?” think again.</p>
<p>That really is the last post I will make.</p>
<p>You know, nobody’s lost more jobs to China than California, texas is a distant second. Anybody from that state should really know that this is a real thing. This is how it works.</p>
<p>Yep- that has been exactly been what I have observed. Once its on the board as an option and there is a team looking into it it becomes very attractive to book that savings. Especially since if you didnt like the first round of bids, China will come back to you with another round. </p>
<p>BTW- if is a “passed on sales tax” then it is no longer 2.3%.
The IRS asks price I sold the covered item at. Suppose it is $100, then I owe the IRS $2.30. But I want to pass it on to you, so now I price the item at $102.30. But if I sell it for $102.30 now I owe $2.35. Ah I’ll sell it for $103.</p>
<p>We dont have a lot of pricing transparency in the medical world. A man has a procedure where doctors go down his throat and look at his lungs. Takes 2 to 3 hours. How much was the procedure? Are we going to start calling hospitals and ask how much the procedure costs? The man didn’t have too much experience with the procedure. He was kind of in a rush too. If something is bad in the lungs, you dont want the bad simmering in those lungs.</p>
<p>Anyway, the cost was $27,000. Would it have made a difference if the cost was $26,300 or $27700? Who knows? Maybe a hospital ten miles away was running an early bird special.</p>
<p>Offshoring doesn’t change the medical device tax, it just shifts the burden of collection and accounting to the importer rather than the manufacturer. Either way it is a cost that is almost uniformly passed onto the purchaser at the time of sales. </p>
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<p>That’s not how a sales tax generally works. It’s not additive – the sales tax in this case applies to the original sale by the “manufacturer, producer, or importer” - not to resales by retailers or other suppliers. But the resales might be covered by other taxes – for example, the manufacturer sells a device to a medical supplier in California, collecting the 2.3% sales tax at the time of sales. The supplier receives two orders, one from Hospital A in the same state, and another from out-of-state Hospital B. The orders are fulfilled, and at the time of fulfillment Hospital A is invoiced for the supplier’s price (which is a markup from the original purchase price), plus California sales tax of 8.5%. Hospital B also pays the supplier’s price, but not the tax, because the item is being shipped out of state and therefore not subject to the state sales tax. But Hospital B may very well owe a use tax to the state where it is located.</p>
<p>The markups at every step of the supply chain are generally well above the tax amount – so that device that cost $100 to make, $102.30 for the supplier to buy, may be sold by the supplier to a hospital for $150, with the hospital then paying $162.75 using the 8.5% state sales tax figure that I gave as an example. If it is a device meant for single patient use related to a surgery or other procedure, the hospital probably turns around and charges the patient $750 for the same device. The insurance company negotiates that down to $300 and calls it a win.</p>
<p>By the way…: I am not disputing what you said, poetgrl. Poetgrl, if you were told firms were going to outsource their manufacturing, I believe it.</p>
<p>How many times is this sales tax going to be paid? </p>
<p>Manufacturer in or ousude this country sells the medical device to a hospital. Sales tax owed? Now hospital sells device to consumer. Is there another sales tax due? When is the device taxed?</p>
<p>No it’s not. It’s just like the sales tax I pay on a restaurant meal. The meal costs $100, the tax is 6%. I’m presented with a bill showing $100 for the meal and $6 for the tax. I pay $106. But when the restaurant turns over its collected taxes to the state government, the state doesn’t say, “Oh, you collected $106 from bclintonk, so you owe us 6% of that, or $6.36.” It’s clear to everyone, including the state, that I purchased the meal for $100, not for $106, and the 6% sales tax is a tax on my $100 purchase.</p>
<p>I take it that’s just exactly what the statute means when it says “tax on the sale of medical devices.” If the device is sold for $1,000, the seller presents the purchaser with an invoice reflecting $1,000 for the device and $23 for the tax, for a total of $1,023.</p>
<p>Now there’s still a question about the real “incidence” of the tax: will the seller be able to recoup that full $23 from the purchaser, or will the seller need to reduce its price because the purchaser is so price-sensitive that it will make the purchase only if its total cost, including the tax, remains $1,000? Or will they split the difference, with the seller reducing its price by something less than the full $23, so the purchaser pays a little more and the seller accepts a little less revenue? </p>
<p>All the evidence so far seems to indicate that purchasers of medical devices are not highly price-sensitive. In fact, critics charge it’s an industry rife with anti-competitive practices, lack of transparency due to the widespread use of confidentiality agreements, and conflicts of interest (e.g., physicians making the call on which medical device to use standing to gain financially from the use of a particular device). If that’s the case, it’s likely that the entire cost of the tax, or most of it, will be passed on to the ultimate consumer, you and me.</p>
<p>If it works like a sales tax then tax is due each time the product is sold. Think new car to used car. There is tax due on each sale. There are exceptions but not worth discussing here.</p>
<p>And…I send jobs overseas. My manufacturing overseas. The product is made by a subsidiary overseas for $10. I sell the product to another subsidiary in the US for $20 and The US subsidiary pay the tax of 2.3 percent on $20. Now the US subsidiary sells the product to a hospital for $100. There is a 2.3 percent tax on the $100? The hospital bills the patient $700 and the insurance company cuts the bill to $300. Another tax on the $300 sale?</p>
<p>Can I pass that on? Maybe I can and maybe I cant. However if I want to pass it on, I cant just raise prices by 2.3% because the excise tax applies to all of the newly raised price. </p>
<p>As implemented this is clearly different than a sales tax.</p>
<p>bclintonk: Check the IRS form above- I am pretty sure that its not working the way your restaurant analogy describes.</p>
<p>Yes, they are paid ONLY ONCE, by manufacturer, producer and importer. That is in the express language of the statute. </p>
<p>They are accounted for at the time of sale, and standard practice is that the seller reflects the sales tax as a line item on the invoice, per item. </p>
<p>The business is required to submit a tax return on a periodic basis, accounting for the sales. That’s the form that argbargy is talking about. </p>
<p>So let’s say that I manufacture xray machines. I collect taxes at time of sale from my customers. My bookkeeping staff keeps an account of that, and makes periodic deposits to our company tax account with IRS. Then on a quarterly basis my accountant submits a form to the the IRS and transmits any balance owed, just the same as the way I must account for the payroll taxes I pull out of my employee’s pay checks.</p>