I.R.S. Moves Forward with New Tax on Medical Device Manufacturers

By February 3, 2012Taxation

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

Carolyn Lee

Carolyn Lee

Executive Director of The Manufacturing Institute at The Manufacturing Institute
Carolyn Lee is Executive Director of The Manufacturing Institute, the non-profit affiliate of the National Association of Manufacturers (NAM), the nation’s largest industrial trade association. Carolyn drives an agenda focused on improving the manufacturing industry through its three centers: the Center for the American Workforce, the Center for Manufacturing Research, and the Center for Best Practices.

In her role, Carolyn leads the Institute’s workforce efforts to close the skills gap and inspire all Americans to enter the U.S. manufacturing workforce, focusing on women, youth, and veterans. Carolyn steers the Institute’s initiatives and programs to educate the public on manufacturing careers, improve the quality of manufacturing education, engage, develop and retain key members of the workforce, and identify and document best practices. In addition, Carolyn drives the agenda for the Center for Manufacturing Research, which partners with leading consulting firms in the country. The Institute studies the critical issues facing manufacturing and then applies that research to develop and identify solutions that are implemented by companies, schools, governments, and organizations across the country.

Prior to joining the Institute, Carolyn was Senior Director of Tax Policy at the NAM beginning in 2011, where she was responsible for key portions of the NAM’s tax portfolio representing the manufacturing community on Capitol Hill and in the business community and working closely with the NAM membership. She served as the Director of Legislative and Government Affairs at the Telecommunications Industry Association, Manager of State and Federal Government Affairs for 3M Company, and in various positions on Capitol Hill including as Legislative Director for former U.S. Senator Olympia Snowe (R-ME), and as a senior legislative staff member for former U.S. Rep. Sue Kelly (R-NY).

Carolyn is a graduate of Gettysburg College in Gettysburg, Pennsylvania graduating with a B.A. in Political Science. She resides in Northern Virginia with her husband and three children.
Carolyn Lee

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Join the discussion One Comment

  • After 40 years in the health care sector, this new tax in my opinion will only move our innovative health care sector closer to moving off shore. The U.S. health care field has been the principal leader in innovative product development for the past 50 years.

    Current government action clearly demonstrates that it wishes to move this sector of business from innovation into a generic classification. There is less and less incentive for companies or individual scientist to invest time and money into this field of work. We should be doing just the opposite to keep our world class leadership we should be reducing taxes and overly burden regulations in the market sector.

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