September 2010
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Health Care Bill’s Medical Device Excise Tax Stymies Economic Development and Innovation

In March, I voted against the government takeover of health care in part because it imposed over 500 billion dollars of additional taxes, fees, and costs on an already struggling economy. That half a trillion dollars is money that the federal government is going to take out of the economy from employers looking to create jobs and put people back to work.

One of the cost increases in the 2700 page health care bill, the medical device tax, is one of the many facets of this legislation that greatly concerns me. In Section 1305 of the Health Care and Education Reconciliation Act, a 2.3% medical excise tax will be imposed on the sale of medical devices by the manufacturer, provider, or importer. This new tax on the medical device industry will inhibit innovation and impose an additional tax burden on businesses that already carry high research and investment costs. It also will very likely ultimately lead to greater costs and inferior care for patients.

Various businesses across Southwest Ohio and across the country are already looking at making tough financial decisions due to the increased burden that will be imposed by this tax if it is not addressed. Just last week, I met with business leaders from Ferno-Washington Inc., a global leader in the manufacture and distribution of professional emergency and healthcare products based in Wilmington, OH. Leaders at Ferno say the tax increase will hamper the company’s ability to be competitive in the market by causing the company to decrease research, development, and production of new products. The executives at Ferno estimate the cost of the tax is equivalent to 23 jobs.

Ferno is not the only business in the region that would be hurt by the new tax. There are many small-device companies headquartered in Southwest Ohio that will be forced to cut their research and development budgets, or even laying off workers due to the new financial burden imposed by the tax.

The United States is a world leader in medical device research and development. There are over eight thousand medical device firms in the United States, employing over 350,000 people. In addition, the medical device industry sold $135.9 billion worth of products in 2008 and is one of the few industries in the U.S. that has experienced growth, around 11 percent, over the last few years.

At a time when national unemployment rate hovers around 10 percent, Congress should be implementing policy that provides relief to small businesses, the backbone of the U.S. economy, so they can expand and hire more American workers. I am a cosponsor of H.R. 5095, Protect Medical Innovation Act, introduced by my colleague Representative Erik Paulsen of Minnesota. This legislation would remove the medical device excise tax from the Internal Revenue Code. The medical device excise tax unfairly penalized entrepreneurship and innovation in the health care industry and Congress should repeal this tax before it costs American workers their jobs and lowers the quality of American health care.

Unfortunately, this tax is just one of many provisions in health care reform that place an undue burden on America’s small businesses. I will continue to fight to repeal and replace the reckless and expensive health care legislation with common sense solutions that will truly bring down costs for individuals and small businesses while increasing access for all Americans. Obtaining quality medical care is a top priority for Ohioans and their families. We can and must work together on a bipartisan basis to achieve real reform.

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