Obamacare Declares War on Growth Capital -- By: Deroy Murdock
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<span style="font-family: 'Times New Roman','serif'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"><span class="drop">A</span>merican companies are gasping for cash like beached fish fruitlessly flapping their gills. Rather than help these firms find financial oxygen, President Obama would accelerate their asphyxiation.<br /><br />Specifically, Obama’s February 22 health-reform <a href="http://www.whitehouse.gov/sites/default/files/summary-presidents-proposal.pdf">proposal</a> would slap the 2.9 percent employer-employee Medicare tax onto “income from interest, dividends, annuities, royalties, and rents.” This spanking-new investment-income tax would slam individuals who make more than $200,000, north of $250,000 for married couples. These folks, who often risk their money in fledgling companies, are not celebrated by Washington for their job-creation efforts. Instead, Democrats are demanding that they surrender even more of the proceeds of their productive capital.<br /><br />This 2.9 percent tax may sound picayune, but only until its ten-year <a href="http://atr.org/userfiles/022210pr-obamacaretax(1).pdf">cost</a> emerges: $234 billion (Americans for Tax Reform’s estimate), or $334 billion if it smacks capital gains. <br /><br />So, while unemployment hovers near 10 percent and the economy reeks of a relentless hangover, Obama would vacuum up as much as one third of a trillion dollars from the productive sector and pump it into an increasingly hated, parasitic entitlement scheme.<br /><br />Every dollar that Obamacare would suck out of investors is one fewer dollar that could help fund a new patent application, charter a new company, hire a new sales representative, or export a new product.<br /><br />Investors who face diminished returns on capital will spurn potential opportunities. This new tax will frustrate those whose promising innovations lack financing. <br /><br />These negative repercussions would reverberate beyond the “idle rich” who supposedly fan themselves with dividend checks between swings of their croquet mallets. <br /><br />“With a less productive economy, there would be fewer job opportunities,” <a href="http://thf_media.s3.amazonaws.com/2010/pdf/wm2817.pdf">predict</a> the Heritage Foundation’s Dr. Karen A. Campbell and Guinevere Nell. “Thus, wages and salaries are estimated to fall by an average of $14 billion per year nominally.” They add: “Taxing the investment income of high-income individuals is estimated to reduce the economy’s potential by an average $10.2 billion per year. That is $102 billion of real accumulated lost opportunities over 10 years.”<br /><br />Heritage’s analysts further forecast that this Obamacare tax would “lose $1.37 in gross domestic product (GDP) for every dollar of additional revenue collected.”<br /><br /><br /><br />The president’s policy of capital deformation could not be more ill-timed. Weary entrepreneurs and managers are scrounging for cash as investors take cover from Obama’s unrewarding business climate.<br /><br />“Lending Falls at Epic Pace,” <a href="http://online.wsj.com/article/SB10001424052748704188104575083332005461558.html">sobbed</a> the front page of February 24’s <em style="mso-bidi-font-style: normal;">Wall Street Journal</em>. Total bank loans outstanding slid 7.4 percent last year to their lowest level since 1942. <br /><br />Beyond traditional banks, “investments by venture capital firms fell to $17.7 billion in 2009, the lowest since 1997, down 37 percent from 2008,” calculates David Malpass, president of New York’s <a href="AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/EHMIF34C/EncimaGlobal.com">Encima Global</a>, LLC. “VC firms also had trouble building new funds, raising just $15.2 billion in 2009, a 47 percent decline from 2008.”<span style="text-decoration: underline;"><br /><br /></span>Malpass believes this helps explain America’s lingering joblessness. “Without an active venture capital market, the labor market recovery will be held back. Some 20 percent of GDP has been accounted for directly by companies that were venture financed.”<br /><br />Amplifying this misery, Obama would slap a $22 billion tax on pharmaceutical companies, atop their existing 35 percent corporate tax liability. Democrats relentlessly rail against the “greed” of Merck, Novartis, and other drug companies. However, they should explain how depleting pharmaceutical coffers will encourage these companies to underwrite new and improved remedies.<br /><br />Obama’s plan would stick a similarly senseless $19 billion tax on medical-device makers, heretofore hailed for creating prosthetic limbs, insulin pumps, pacemakers, and similar life-enhancing and life-saving technologies.<br /><br />“We should be focusing our efforts on policies that will promote innovation, patient care, and job creation in the U.S.,” <a href="AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/EHMIF34C/MedicalDevices.org">Medical Device Manufacturers Association</a> president Mark Leahey <a href="http://www.marketwatch.com/story/mark-leahey-president-and-ceo-of-the-mdma-discusses-health-care-reform-and-other-pressing-issues-at-utc-breakfast-event-2010-02-18?reflink=MW_news_stmp">told</a> the Utah Technology Council on February 18. This new tax, Leahey added, “will result in companies laying off employees, moving jobs outside the U.S., cutting research and development, and slowing the introduction of breakthrough therapies.”<br /><br />Washington Democrats should stop smothering American enterprise. These $375 billion in new taxes may brighten Obamacare’s balance sheet. But that makes $375 billion that won’t be financing the productive, job-launching activities of those Americans from whom this cash would be squeezed.<br /><br /><span class="bioline">-- <em>Deroy Murdock is a nationally syndicated columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution, and Peace at Stanford University.</em></span></span></p><br /><hr width=100% size=2><br />
