Aug 20, 2014 - 2:30pm

Medical Device Tax Misadventure

Senior Editor, Digital Content

You may recall that a 2.3% medical device tax was imposed as part of Obamacare. The IRS’s watchdog has determined that collecting the tax is a mess. Senator Orrin Hatch (R-UT) succinctly said, "Everything from this ill-conceived tax's structure to its implementation has been a disaster.”

That’s putting it lightly.

First, it’s not raising as much money as expected, The Hill reports:

Originally, the IRS estimated it would receive between 9,000 and 15,600 forms to pay the tax, raising $1.2 billion in the second and third quarters of 2013, according to the [Treasury Inspector General for Tax Administration]. But the IRS only received roughly 5,100 forms, and reaped just $913.4 million.

Second, the Inspector General’s report says the IRS can’t figure out who should be paying the tax:

The IRS still cannot identify the population of medical device manufacturers registered with the FDA that are required to file a Form 720 and pay the medical device excise tax.

Those are the troubles with collecting it. However, the biggest problem with the medical device tax is that it’s hurting a vibrant, innovative, American industry, making it less globally-competitive, and costing jobs.

An AdvaMed report estimates that as many as 165,000 jobs have been lost because of the medical device tax. In addition the report found that research and development (R&D) has already been cut and more cuts are expected in the future.

A recent Milken Institute study found that medical devices lifted GDP by $106.2 billion annually from 2008 to 2010. Allowing the medical device tax to continue will mean fewer medical and economic benefits from this industry.

Senator Lamar Alexander (R-TN) summed it up well:

Today's report showing the IRS has no idea how to implement this job-killing tax should be the final nail in the coffin. There is no reason the Senate shouldn’t end this onerous $30 billion tax on revenue that has cost 33,000 jobs, discouraged innovation, and raised the price tag on life-saving medical devices.

The medical device tax must be repealed.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.