A 2.3 percent tax on medical devices, such as MRI machines, has senators of both parties up in arms. Photo credit pennstate via Flickr.
It’s not often one finds bipartisan agreement in the Senate, but Thursday night seventy-nine senators joined to symbolically repeal the medical device tax provision of healthcare reform—a 2.3 percent levy on medical device companies that is projected to raise $30 billion over ten years to help finance the new law.
The vote brought together every Republican in the upper chamber plus thirty-three Democrats, including liberal stalwarts like Senators Elizabeth Warren, Al Franken and Ron Wyden. The vote was symbolic because it was a non-binding amendment to a budget resolution that also isn’t binding, but it does represent a serious bipartisan desire to get rid of the tax.
Opponents claim the tax will push medical device manufacturers overseas, costing a substantial amount of jobs, and will also stifle innovation, hurt small businesses, and cause increased costs for healthcare consumers.
The problem, however, is that virtually none of this is true. And the bipartisan push to repeal the tax—driven in large part by fealty to medical device companies in senators’ home states, which can be generous campaign contributors—underscores the many landmines that await if Congress takes up comprehensive tax reform at some point this year.
Closing loopholes in the tax code is easily said, but much harder to do when big-money special interests are involved, and the public isn’t really watching.
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The chief attack on the medical device tax, which applies to everything from bedpans to MRI machines, is that it will cost jobs—a potent claim given the country’s high unemployment. “A 2011 study by the Hudson Institute found that the device tax threatens nearly 43,000 jobs nationwide, and will cost 3.5 billion in wages,” Senator Kelly Ayotte said during floor debate Thursday night. Members of Congress who oppose the tax frequently cite those numbers.
But that’s not really a Hudson Institute study—it was conducted by a senior Hudson fellow and a senior Manhattan Institute fellow, but financed by Advamed, a medical technology industry group.
The job loss claims fall apart upon even brief inspection. The tax applies on medical devices sold in the United States, not manufactured here—so moving a plant to Mexico doesn’t change anything. Medical device companies would have stop selling their products in the United States to escape the levy, which is simply unbelievable. The American healthcare market is by far the most lucrative in the world, as the country spends more on healthcare than any other by many orders of magnitude. No company is likely to leave the American market or even to reduce sales in order to avoid a 2.3 percent tax.