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Reps. Paulsen and Eshoo Urge "Guardrail", Small Business Exemption in Medical Device Tax

Reps. Paulsen and Eshoo Urge “Guardrail”, Small Business Exemption in Medical Device Tax
U.S. Representatives Send Letter to Speaker Pelosi Seeking to Minimize Negative Impact of Expected Tax
 
FOR IMMEDIATE RELEASE: January 6th, 2010
 
CONTACT: PAULSEN: Luke Friedrich (952) 405-8510 / Andrew Foxwell (202)225-2871 //ESHOO:  Ben Bradford (202)225-8104
                    
WASHINGTON –Congressman Erik Paulsen (R-MN-03) and Congresswoman Anna Eshoo (D–CA–14), Co-chairs of the House Medical Technology Caucus, sent a letter to Speaker of the House Nancy Pelosi today, urging her to consider two changes to the proposed medical device tax expected to be included in final health care legislation.  Paulsen and Eshoo proposed an exemption for small medical device firms, who face extremely high start-up costs, as well a “guardrail” that would halt the device tax once total tax collections – targeted for $20 billion by 2020 - have been met. 
 
“While I continue to oppose this tax altogether, at the very least Congress should seek to minimize the negative impact this tax will have on jobs and life-saving innovations,” Paulsen said.  “By exempting small businesses, we can attempt to encourage innovation and protect jobs.  Moreover, by establishing a guardrail against additional tax collections, we can provide certainty that this tax will not spill over beyond its established purpose.”
 
Medical devices save and improve lives, so it’s critical that we promote research and development,” Eshoo said.  “California has been a center of this research for years, and more than 100,000 jobs are tied to it in our state alone.  Restructuring this tax will preserve the role of innovative small businesses in the medical device industry while ensuring the same substantial dollar contribution to healthcare reform.”
 
 
A copy of the letter is attached, with text below.            
 
The Honorable Nancy Pelosi
Speaker of the House
H 232, the Capital
Washington, D.C. 20515
 
Dear Speaker Pelosi,
 
As you know, we have strong interests in the medical technology industry in California and Minnesota, and the life-saving medical devices the industry produces.  While we appreciate the reduced tax on medical devices, there are two provisions related to collecting those taxes that we believe would promote greater equity without reducing the revenue target.
 
First, we propose an exemption from the tax for small businesses.  It takes a significant amount of venture capital and R&D funding to develop a medical device product and bring it to market.  Much of the actual innovation is done by small companies which are subsequently bought by larger companies.  Maintaining the $20 billion tax but exempting small device companies would collect the same amount of revenue to pay for healthcare reform, while encouraging new developments in medical devices.  The industry suggests companies with $100 million in annual sales be exempt, and a smaller tax for companies from $100 million to $150 million, but we understand that both you and the Committee Chairmen will need to establish what constitutes a small business.
 
Second, H.R. 3932 sets the device tax rate at 2.5 percent tax on all medical device manufacturers to raise $20 billion by 2020, a rate devised by the Joint Committee on Taxation.  There are concerns that this rate will raise significantly more than $20 billion and we propose a “guardrail” to stop the collection of taxes after $20 billion has been met.  A freeze of the tax after the total has been met will allow the industry to continue to grow without reducing the $20 billion targeted for healthcare reform costs.
 
We appreciate your consideration of these two potential modifications to the medical device tax. 
 
Sincerely,
 
 
 
___________________            &nbs;