Last November, the American people sent a message to Washington: Get things done. With Republican control of both chambers of Congress and the Oval Office, the time to enact pro-growth, pro-innovation policies that benefit American workers and businesses is now.
This month, Congress and the Trump administration have the opportunity to significantly boost one of America’s most vibrant and growing industries by suspending the federal excise tax on medical devices. This misguided tax is set to go back into effect on Jan. 1, which is why Reps. Jackie Walorski, R-Ind., and Erik Paulsen, R-Minn., recently introduced legislation that would suspend the medical device tax for five years.
The medical device tax was tucked into Obamacare to help pay for the law’s excessive costs. A range of medical instruments such as pacemakers, heart valves and hip implants that benefit patients around the globe are subject to this tax.
It should come as no surprise that this excise tax has cost thousands of American jobs, stifled innovation and slowed economic growth.
Even before the tax was implemented in 2013, device manufacturers braced for its negative impact by laying off thousands of workers. When the tax did take effect, job losses plunged further. Since 2012, the medical device tax alone has cost more than 28,000 jobs.
That’s not the only cost the medical device tax has imposed on hard-working Americans. As device manufacturers faced the tough decision of increasing costs to consumers, cutting future investments or a combination of the two, medical innovation has suffered.
With resources tied up under the burden of the medical device tax, funding for potential life-saving technology and research and development was put on hold or halted altogether.
This tax is particularly unfair because it is assessed on the gross sales of companies, not their net profits. That means even if a company is not profitable it still gets hit with the tax. As a result, it hurts startups and companies struggling to launch a new innovation. By eliminating the medical device tax, more startups and small businesses who otherwise may not have been able to afford startup costs will enter the industry.
These effects on medical device innovators and our economy are exactly why Congress voted with broad bipartisan support to suspend the medical device tax for two years in December 2015. Once the tax was suspended, the industry began to rebound.
But the two years are now nearly up.
A recent Advanced Medical Technology Association survey found that since 2015, 73 percent of surveyed device manufacturers either increased or avoided reducing employment since the tax was suspended. Furthermore, 83 percent reported they increased funding for research and development or avoided reducing research and development funding.
With the tax set to go back into effect on Jan. 1, Congress should pass legislation before the end of the month to suspend the medical device tax. We have already seen the damaging results of this misguided tax taking effect, and our economy cannot afford to make the same mistake again.
Rep. Jim Banks, a Republican, represents Indiana’s third congressional district in the U.S. House of Representatives.