Although one might think that it was near impossible, the U.S. tax code just got worse for manufacturers of medical devices. Manufacturers lament the IRS’s issuance of a new regulation to implement 2.3% excise tax on medical devices that was included in the President’s health care law. The NAM has opposed this tax because of the impact it will have on the ability of the medical device industry, a true American success story, from competing and innovating on the new products and devices that will help save lives.

This new tax appeared during the debate on the Patient Protection and Affordable Care Act, as a way to help “pay for” the bill. The 2.3% tax will have the effect of raising the effective tax rates for medical device companies – over 80% of which are small businesses with fewer than 50 employees – forcing these companies to have to make tough decisions about how to fill the earnings lost to additional taxes.

At a time when so much of the conversation in Washington centers on the need to increase jobs, stimulate growth and encourage innovation, the imposition of this excise tax completely contradicts these messages. U.S. medical device manufacturers are the world-leaders and the imposition of this new tax will have the effect of making the industry less competitive and reducing capital to invest in new R&D, new technologies and new employees. With contradictory actions like these, praising the industry for its life-saving innovations while slapping a new tax on them, it’s no wonder that so many have expressed a lack of faith in what’s going on in Washington.

Perhaps though, a step could be taken in the right direction if Congress can pass legislation, pending in both the House and Senate, to repeal this innovation-stifling tax. H.R. 436 by Rep. Paulsen already has overwhelming support in the House with 227 cosponsors and there are two bills also pending in the Senate, S. 17 by Sen. Hatch with 19 cosponsors and S. 262 by Sen. Brown (MA) with two. It’s time for Congress to repeal this tax.

Carolyn Lee is NAM’s Senior Director of Tax Policy

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