Tax Foundation, AdvaMed Warn Return of Device Tax Will Cost Jobs
A new report from the Tax Foundation, a Washington, DC based think tank, warns that if the 2.3% excise tax on medical devices is not repealed, it could lead to a loss of more than 21,000 jobs over the next two years and reduce US gross domestic product by $1.7 billion.The tax, which was put in place under the Affordable Care Act, was only collected from 2013 to 2015 as a result of two two-year moratoriums passed by Congress in 2016 and 2018.
However, the second moratorium is set to expire at the end of the year, meaning that the tax will take effect on 1 January 2020 if Congress does not take action to delay or repeal it.
“The medical device tax is flawed tax policy. The negative effects of the tax outweigh the relatively small projected revenue,” the Tax Foundation writes, arguing that the cost of the tax will stifle investment in the medical device industry and result in higher costs to consumers.
On the other hand, the Congressional Budget Office estimates that an extended moratorium or repeal of the tax will result in a $25 billion loss of tax revenue over the next decade.
Device industry group AdvaMed, which has lobbied against the tax since its inception, touted the Tax Foundation’s findings and urged Congress to permanently repeal the tax before the end of the year.
“The first time this tax was in effect, we saw massive job losses in the first two years. That’s just the nature of an excise tax. And in an industry that’s 80 percent small businesses, cutting jobs quickly is unfortunately the only way to keep the doors open. That’s not smart health policy … putting off repeal until the new year is not an option for the patients who depend on these companies for the medical technologies that improve and save their lives,” said AdvaMed President and CEO Scott Whitaker.
Multiple efforts to permanently repeal the tax or delay it for an extended period have failed to find a path through Congress in recent years.
In 2018, a bill to permanently repeal the tax made it through the House but failed to make it out of committee in the Senate. Similarly, the Protect Medical Innovation Act of 2019, which has bipartisan support in the House and Senate has yet to be taken up in committee in either chamber.
Tax Foundation, AdvaMed