Re-imposing medical device tax could cost more than 21,000 jobs, claims new report

December 05, 2019

The medical device excise tax is back on the nation’s docket. Part of the Affordable Care Act (ACA), aka Obamacare, the 2.3% levy on most medical devices sold in the United States was intended to help fund the ACA but has been suspended since 2016. The moratorium sunsets at the end of this year, unless Congress extends it or, as the medical device industry and its lobbyists would prefer, repeals the tax. A new report from the Tax Foundation (Washington, DC), which describes itself as a nonprofit independent tax policy research organization, makes the case for a full-on repeal of the device tax. If imposed, writes the organization, the tax would result in the loss of more than 21,000 full-time jobs in the next two years and a $1.7 billion reduction in GDP.

medical device tax

“The tax fails to lower healthcare costs for consumers but increases costs and burdens on the healthcare industry,” writes Ulrik Boesen, Senior Policy Analyst, Excise Taxes, at the Tax Foundation. Boesen also notes that repeal of the tax has drawn rare bipartisan support. “Even President Obama entertained the idea of repealing the tax,” he writes in the report. Lawmakers from both sides of the aisle also have expressed support in the past, including Massachusetts Senator Elizabeth Warren (although, it should be noted, that Democratic support comes largely from elected officials with a consequential medtech-related constituency).

As has been stressed in the past, the report notes that startups and smaller companies are disproportionately affected by the tax. “Since the levy is a tax on sales, with no regard for profitability, companies with smaller profit margins would face greater tax burdens than companies with larger profit margins,” writes Boesen. Much of the innovation in the medtech sector comes from these businesses, and the tax would stifle that creativity, argue opponents of the tax.

Medtech lobbying organization AdvaMed has the full report available as a free download on its website. Stressing the urgency of the matter, AdvaMed writes, “Congress must end the tax once and for all to save and improve patients’ lives and to encourage job growth and innovation. Only with long-term tax relief will the medtech industry be able to make the multi-year investments in R&D and infrastructure necessary to sustain this dynamic innovation ecosystem.”

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