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Repeal the Medical Device Tax

Protect American Jobs and Innovation

On January 1st, 2013, a new 2.3% excise tax on American medical device innovation will go into effect  - resulting in job loss, reduced U.S. innovation & competiveness, outsourcing, and cuts to research & development.

 

Effects of the Medical Device Tax:

  • Stryker has already laid off approximately 1000 workers, or 5% of their work force.

  • Zimmer is already being forced to make decisions related to headcount and investments to recoup the expected earnings loss due to the harmful tax.

  • Cook Medical is looking at a tax burden of 55% of profits and an expected hiring freeze. The company announced it axed existing plans to open a new US manufacturing plant every year.

 
 

Taxmageddon' isn't only about the half-trillion-dollar blow to the economy that arrives in 2013 on the end of the Bush-Obama tax rates. Several of the Affordable Care Act's worst tax increases kick in too, such as the new excise tax on medical devices. The 2.3% levy applies to the sale of everything from cardiac defibrillators to artificial joints to MRI scanners. The device tax is supposed to raise $28.5 billion from 2013 to 2022, and it is especially harmful because it applies to gross sales, not profits. Companies at make-or-break margins could be taxed out of existence, especially in an intensely competitive industry where four of five businesses are start-ups or midsized.

Wall Street Journal, Dr, Henry Miller:  ObamaCare's Killer Device Tax

Much of the political conversation in Washington these days concerns innovation, job creation and competitiveness. But talk is cheap, and elected officials must enact policies that enhance economic activity and job creation. The medical device industry is an example of Washington doing exactly the opposite… Yet instead of protecting this paragon of American ingenuity and innovation, the Obama administration and Congress have viewed the industry as a cash cow from which they could milk profits to help pay for the president's health law.

Washington Post, George Will:  Medical-device tax already hurting business

An axiom of scarcity is understood by people not warped by working for the federal government, which can print money when it wearies of borrowing it. The axiom is: A unit of something — time, energy, money — spent on this cannot be spent on that. So the 2.3 percent tax, unless repealed, will mean not only fewer jobs but also fewer pain-reducing and life-extending inventions — stents, implantable defibrillators, etc. — which have reduced health-care costs.

 

The Details:

The medical device tax will have a detrimental effect on our recovering economy:  

The U.S. is a net exporter of medical devices, exporting $5.4 billion more than it imports. Our lead has shrunk dramatically over the last decade, however, largely due to higher U.S. tax rates and a lower R&D tax credit than competitor nations. During this delicate period, business should not be further complicated for American businesses who generate wealth and create jobs by imposing further tax burdens and disincentivizing trade. 

The medical device tax creates an environment that harms U.S. business:

The tax burden created by the medical device tax will make it more expensive for medical device companies to do business in the United States, causing the loss of revenue and American jobs as business relocate overseas or reduce their operations in order to compensate for these additional expenses. 

The medical device tax is a tax on sales, not profits:  

Eighty percent of device companies have fewer than 50 employees.  Taxing sales disproportionately affects start-ups, who tend to invest heavily in R&D and reap smaller profits. Smaller medical device companies would turn profits into losses after paying the device tax on their sales. Companies such as NxStage, another start-up, could end up adding to losses after paying the medical device tax even though it made no profits.

The medical device tax stunts medical innovation:

The medical device industry is now in the position of having to lay off workers and choosing which projects it can afford to fund. Because of innovation, life expectancy in the U.S. increased by more than three years between 1986 and 2000 and the burden of chronic diseases representing more than 70 percent of healthcare costs has been reduced. As our population ages, a tax on innovative new treatments and healthcare solutions slows medical advancement and puts the health of our citizens at risk.

 

Congress Tweets For Repeal: 

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