The Downfalls of Taxing Innovation

By May 30, 2012Taxation

Tomorrow the Ways and Means committee will mark up the Protect Medical Innovation Act of 2011 (H.R. 436), repealing the 2.3% excise tax on the gross sales of medical devices included in the health care reform law. Set to take effect in 2013, this excise tax is estimated to cost US businesses close to $30 billion in new taxes. This will effectively back companies into a corner to scale back operations and cut resources for R&D, thus stifling innovation and forcing job cuts.

This industry-specific tax will be particularly harmful for small to medium sized manufacturers (80 percent are companies with 50 or less employees, 98 percent have 500 employees or less), as the tax is assessed on a company’s sales rather than profits. In fact, many companies have already announced layoffs in anticipation of the effective date.

Medical device manufacturers have been a shining star throughout our economic recession and the US continues to be the world leader in manufacturing life-saving and life-enhancing treatments. We should not constrain this segment of the manufacturing community, but rather see that their success continues well into the future. The NAM strongly supports rolling back this tax before it takes effect.  We need to ensure that medical device manufacturers are able to remain dynamic and innovative in order to improve the quality of life of patients.

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