Medical device companies under siege.

• Position: ObamaCare

New IRS code Section 4191 belies the Obama Administration talk concerning its commitment to protecting small business from onerous tax burdens. Effective Jan. 1, 2013, in accordance with the Patient Protection and Affordable Care Act, the Internal Revenue Service now levies a 2.3% annual excise tax on the total revenues of medical device companies, regardless of whether those firms generate a profit, points out Jonathan W. Emord, an attorney and the principal of Emord and Associates, Clifton, Va., as well as the author of several books, the most recent being Restore the Republic--How the American People Can Once Again Be Free and Prosperous. He stresses that medical device companies have been responsible for considerable innovation in the marketplace over the last half-century, making everything from knee and hip replacements, dental implants, and catheters to head lights and head-mounted cameras for physician use during surgical procedures to MRIs and CAT scans to virtual reality displays for complex surgery.

A MEDTAP International study reveals that, between 1980 and 2000, medical device makers contributed to a four percent increase in life expectancy and a 25% decline in disability rates. This $125,000,000,000 industry now is suffering a $28,000,000,000 tax hit. More than 75% of medical device makers are small, employing 50 or fewer people. A majority have five or fewer total employees.

The medical device tax is peculiar in that the Affordable Care Act imposes it on total revenues, rather than net receipts or profits, Emord observes. The difference in application magnifies the amount collect ed from individual firms and commonly will exact half or more of all profits from medical device makers.

The tax on total revenues, rather than on profits, is draconian in its punitive impact, adds Emord. For many companies, the tax is beyond survivable.

Those that now barely make a profit will go out of business. Most firms in the industry gross under $5,000,000 annually. Profits in such companies rarely exceed $200,000 annually. If a 2.3% excise is applied to a company making $5,000,000 and having profits of $200,000, the amount due in tax is a whopping $115,000, 58% of total profits. That tax exaction...