Michael Barbella, Managing Editor10.09.14
It was a noble effort to say the least. Nearly half a dozen states have tried their best to undermine the 2.3 percent medical device excise tax over the last 22 months but failed. Some of the magisterial attempts, like those hatched by Alaska and California lawmakers, never stood a chance while others would have had a significant impact with the proper support.
Indiana and South Carolina politicians, for example, proposed creating a statewide tax credit for medtech manufacturers that matched the federal tax—essentially voiding the device tariff—and would have applied strictly to U.S. Food and Drug Administration fees. Democratic U.S. Rep. Bakari T. Sellers, a co-sponsor of the South Carolina bill (H. 4365), said the legislation was intended to soften the blow of some (particularly one) Affordable Care Act (ACA) provisions: “I think the medical device tax is a burden, and if we do something like this it can give us an economic edge,” Sellers told CNN over the winter.
Despite support from the South Carolina Biotech Industry Organization, Palmetto State legislators ultimately decided against life on the “edge,” nixing Sellers’ bill in the House Ways and Means Committee. Indiana’s HB1256 suffered a similar fate, though that proposal never even made it to committee.
Score two for the ACA.
California’s device tax revolt was short-lived as well. State Assemblyman Jim Patterson (R-Fresno) was still basking in the glory of partisan camaraderie last April when Revenue and Taxation Committee members turned their backs on his non-binding resolution (A.J.R. 17) to repeal the controversial levy. The measure slowly died from neglect.
Another one bites the dust.
Every defeat, however, can sow the seeds of victory. Such was the case with A.J.R. 17, which indubitably inspired identical legislation 1,482 miles north in Alaska. Like its Golden State counterpart, the GOP-sponsored H.J.R. 20 urged President Obama and Congress to repeal the medical device tax but lacked the legal authority to abolish it. The measure, of course, was symbolic in nature, existing solely as a condemnation platform by Republicans.
“The medical device tax takes direct aim at American innovation by punishing researchers and high-tech biomedical manufacturers, which any one of us or our constituents may need some day,” Rep. Bob Lynn (R-Anchorage), bill sponsor, said. “Why tax life-saving devices? This tax is anti-business and is bad for patients.”
It’s apparently bad for medtech workers and the U.S. economy too: Lynn contends the device levy already has triggered thousands of layoffs and threatens the economic viability of regions with sizable medtech markets, though his resolution is short on specifics. Nevertheless, House Joint Resolution 20 sailed effortlessly through the Alaska State Legislature, overwhelmingly passing both the House (29-6) and Senate (17-3) before being signed by Republican Gov. Sean Parnell on July 25.
A hollow win, but a victory nonetheless.
Massachusetts politicians achieved a more solid triumph with H. 4297, which attempts to offset the device levy with a state tax credit for medtech manufacturers. Signed by Gov. Deval Patrick on July 24, the legislation authorizes Bay State officials to create a commission to study the feasibility of a tax credit, specifically directing the group to examine its potential cost to Massachusetts; its potential benefit to businesses; and its economic impact to the state. The panel must report its findings and/or recommendations by June 30, 2015.
“Massachusetts ranks second in the nation for medical device design and manufacturing activity. Because of our top ranking, Massachusetts medtech companies pay a disproportionate share of the medical device excise tax,” trade group MassMEDIC Chairman A.J. Meuse and President Thomas J. Sommer wrote in an Aug. 20 letter to Patrick urging him to quickly convene the commission. “Millions of dollars have already left the Commonwealth in the form of excise tax payments. As this tax is deducted from total revenues and is paid prospectively every two weeks, medical device companies have been forced to delay, reduce or eliminate R&D expenditures, job growth and expansion plans. We believe that the medical device excise tax will have a serious long-term effect on the ability of medtech companies to develop and produce innovative medical technologies.”
While not exactly a coup for device tax rebels, H. 4297 offers the industry its best chance at offsetting the levy—if only on a state level. Federal efforts, meanwhile, continue to languish, bogged down by partisan politics and more pressing crises such as Islamic terrorism, Ukranian war games, weather-related disasters and a deadly virus.
Before recessing on Sept. 19, Republican House members resurrected their anti-tax crusade, approving the omnibus Jobs for America Act (H.R. 4) in a 226-191 vote. The bill included a provision to repeal the device levy, courtesy of U.S. Rep. Erik Paulsen (R-Minn.), a tireless advocate of the North Star State’s medtech industry. “The medical device tax continues to ... stifle innovation,” he said in a news release. “The tax has already meant the loss of 33,000 jobs—equivalent to wiping out the entire Minnesota medical device industry—and will continue to harm our economy. Repealing this tax is the only answer for a bad idea that only gets worse.”
So continues the device tax merry-go-round.
Indiana and South Carolina politicians, for example, proposed creating a statewide tax credit for medtech manufacturers that matched the federal tax—essentially voiding the device tariff—and would have applied strictly to U.S. Food and Drug Administration fees. Democratic U.S. Rep. Bakari T. Sellers, a co-sponsor of the South Carolina bill (H. 4365), said the legislation was intended to soften the blow of some (particularly one) Affordable Care Act (ACA) provisions: “I think the medical device tax is a burden, and if we do something like this it can give us an economic edge,” Sellers told CNN over the winter.
Despite support from the South Carolina Biotech Industry Organization, Palmetto State legislators ultimately decided against life on the “edge,” nixing Sellers’ bill in the House Ways and Means Committee. Indiana’s HB1256 suffered a similar fate, though that proposal never even made it to committee.
Score two for the ACA.
California’s device tax revolt was short-lived as well. State Assemblyman Jim Patterson (R-Fresno) was still basking in the glory of partisan camaraderie last April when Revenue and Taxation Committee members turned their backs on his non-binding resolution (A.J.R. 17) to repeal the controversial levy. The measure slowly died from neglect.
Another one bites the dust.
Every defeat, however, can sow the seeds of victory. Such was the case with A.J.R. 17, which indubitably inspired identical legislation 1,482 miles north in Alaska. Like its Golden State counterpart, the GOP-sponsored H.J.R. 20 urged President Obama and Congress to repeal the medical device tax but lacked the legal authority to abolish it. The measure, of course, was symbolic in nature, existing solely as a condemnation platform by Republicans.
“The medical device tax takes direct aim at American innovation by punishing researchers and high-tech biomedical manufacturers, which any one of us or our constituents may need some day,” Rep. Bob Lynn (R-Anchorage), bill sponsor, said. “Why tax life-saving devices? This tax is anti-business and is bad for patients.”
It’s apparently bad for medtech workers and the U.S. economy too: Lynn contends the device levy already has triggered thousands of layoffs and threatens the economic viability of regions with sizable medtech markets, though his resolution is short on specifics. Nevertheless, House Joint Resolution 20 sailed effortlessly through the Alaska State Legislature, overwhelmingly passing both the House (29-6) and Senate (17-3) before being signed by Republican Gov. Sean Parnell on July 25.
A hollow win, but a victory nonetheless.
Massachusetts politicians achieved a more solid triumph with H. 4297, which attempts to offset the device levy with a state tax credit for medtech manufacturers. Signed by Gov. Deval Patrick on July 24, the legislation authorizes Bay State officials to create a commission to study the feasibility of a tax credit, specifically directing the group to examine its potential cost to Massachusetts; its potential benefit to businesses; and its economic impact to the state. The panel must report its findings and/or recommendations by June 30, 2015.
“Massachusetts ranks second in the nation for medical device design and manufacturing activity. Because of our top ranking, Massachusetts medtech companies pay a disproportionate share of the medical device excise tax,” trade group MassMEDIC Chairman A.J. Meuse and President Thomas J. Sommer wrote in an Aug. 20 letter to Patrick urging him to quickly convene the commission. “Millions of dollars have already left the Commonwealth in the form of excise tax payments. As this tax is deducted from total revenues and is paid prospectively every two weeks, medical device companies have been forced to delay, reduce or eliminate R&D expenditures, job growth and expansion plans. We believe that the medical device excise tax will have a serious long-term effect on the ability of medtech companies to develop and produce innovative medical technologies.”
While not exactly a coup for device tax rebels, H. 4297 offers the industry its best chance at offsetting the levy—if only on a state level. Federal efforts, meanwhile, continue to languish, bogged down by partisan politics and more pressing crises such as Islamic terrorism, Ukranian war games, weather-related disasters and a deadly virus.
Before recessing on Sept. 19, Republican House members resurrected their anti-tax crusade, approving the omnibus Jobs for America Act (H.R. 4) in a 226-191 vote. The bill included a provision to repeal the device levy, courtesy of U.S. Rep. Erik Paulsen (R-Minn.), a tireless advocate of the North Star State’s medtech industry. “The medical device tax continues to ... stifle innovation,” he said in a news release. “The tax has already meant the loss of 33,000 jobs—equivalent to wiping out the entire Minnesota medical device industry—and will continue to harm our economy. Repealing this tax is the only answer for a bad idea that only gets worse.”
So continues the device tax merry-go-round.