This article regards taxes on firms lowering their employment rates. The article, written by Jim Spencer (my uncle), discusses how a tax that was approved to help pay for national health care reform is costing the med-tech industry 33,000 jobs and causing many companies to “cut spending on research and development as a result of the new 2.3 percent tax on gross revenue.” Some companies even “expanded overseas operations as a result of the tax.” Repealing this tax has become a new priority to the U.S. medical device industry.

This can be related to what we’ve learned thus far in class in multiple ways; however, the main way is through the taxes we studied. When making our graphs in class, we labeled the original price and the price the buyers pay as well as the price the seller receives after paying the tax. Due to the circumstances, it appears the sellers here (at least, for the most part) are the ones bearing the most burden from the tax, causing them to cut employees and cut spending elsewhere. In these graphs we also calculated the amount of government revenue being produced from taxes. It is the area of the rectangle enclosed by the difference in the price the buyer pays and the price the seller receives after paying tax (width) multiplied by the new equilibrium quantity after the tax (length). Here, the government revenue is reflected by the 2.3% tax on gross revenue.

This tax on Advamed may be causing their company to become less efficient. The companies involved are losing potential gains due to the government raising the tax by laying off workers who could have increased the company’s productivity. The tax is being used to fund health care reform. Much of today’s medical care involves medical devices, but this tax may cause less medical devices to be produced or less research to be done to create new devices. It may be the case that this tax ends up hurting what its funding.