Medical Device Tax
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(dollars paid to the IRS for the medical device tax to date)
Congress needs to act now to repeal the job-killing medical device tax. Learn More
Under the 2.3 percent medical device excise tax, device manufacturers are required to pay the IRS an estimated average of $194 million per month in medical device tax payments (with a payment of approximately $97 million due semimonthly). In a competitive global industry, this tax threatens an industry that employs more than 400,000 workers nationwide, generates approximately $25 billion in payroll, pays out salaries that are 40 percent higher than the national average ($58,000 vs. $42,000) and invests nearly $10 billion in research and development annually. MITA and its industry partners urge Congress to repeal the job-killing tax immediately, asking policymakers to consider the real-time harm being inflicted upon the American economy and patients.
This tax harms jobs and the economy: The American medical technology industry is a true economic success story: providing jobs for more than 400,000 people, creating a growing trade surplus and developing the technology essential to advancing patient care in the U.S. and around the world. Recently, global competition has amplified the incentives to outsource research and development and move manufacturing abroad. Despite these options, many firms have largely resisted the trends seen in other manufacturing sectors and maintained successful research centers and manufacturing plants in the U.S. Adding a $29 billion tax burden on these companies amplifies these pressures and forces companies to consider finding cost savings in their U.S. operations.
The medical device tax hurts one of America’s key high-tech industries.
This tax stifles health care innovation: The medical imaging industry is in a state of constant innovation, and each year brings exciting new advances in reducing radiation dose and improving imaging clarity. Recent developments have given physicians new tools to diagnose and treat diseases at earlier stages, improving patient care and reducing downstream costs to the health care system. Unfortunately, the medical device tax limits the available resources to fund research and development and invest in manufacturing. Less investment in research and development slows the pace of innovation and postpones patient access to the next generation of care.
This tax negatively impacts the medical imaging industry: While this tax was designed to complement an increase in demand for medical devices due to the Affordable Care Act’s insurance coverage expansions, this logic does not extend to imaging equipment. Unlike other devices, imaging equipment is considered infrastructure, based in hospitals and physician offices. While many other devices are designed for use one time for one patient, imaging equipment is designed to be used multiple times, on many patients, for multiple years. As a result, even if a hospital or doctor’s office experiences an increase in patients, they will not necessarily purchase additional equipment. Despite this key difference, firms manufacturing imaging equipment—and other multi-patient devices—are required to pay this 2.3 percent tax as if there is a substantial increase in demand for their products.
This tax taxes sales, not net income. As a result, even companies making no profit have to pay a large tax, which makes it harder for entrepreneurs to attract investment required to support innovative new companies.
This tax raises over $29 billion. Although the Joint Committee on Taxation (JCT) had initially scored this tax at $20 billion in 2010, the JCT now expects the tax to raise over $2.9 billion per year on average, with the annual tax revenue reaching $3.6 billion in 2022.