Concurrent Resolution on the Budget, Fiscal Year 2014

Floor Speech

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MS. AYOTTE. Madam President, I rise in opposition to the amendment I heard that is going to be filed, the so-called Marketplace Fairness Act. I think we have need to rename this legislative proposal for what it is, the Internet Tax Collection Act. I come from a State, New Hampshire, that does not have a sales tax nor do we have an income tax.

One of our famous Governors said low taxes are the result of low spending, and that is how we do it.

There has been a lot of talk on the floor today about somehow this Marketplace Fairness Act is about States rights. This act, which really should be named the Internet Tax Collection Act, infringes on the rights of retailers in New Hampshire and businesses that have thrived and grown over something great called the Internet. It forces them to become tax collectors for the rest of the Nation. In fact, they would be forced to become tax collectors for nearly 10,000 tax jurisdictions across this country should this proposal go forward.

I have heard a lot of talk about leveling the so-called playing field. There is nothing level about this playing field. These are cash-strapped States looking for more money and asking Washington to impose burdens on other States that have chosen to have a low tax burden, like States such as mine which doesn't have a sales tax. In fact, this is another attempt to turn our businesses into tax collectors. I think it is wrong.

It is the opposite of States rights. There has been some discussion of conservative support for this. There is absolutely nothing conservative about this proposal because, again, what this is about is officials in cash-strapped States across the country looking for new ways to plug their budget holes. They are attempting to make New Hampshire businesses, and other businesses across this country, use the Internet to collect their taxes. This is not just about the State of Tennessee handling its own taxes, it is making New Hampshire, which has no sales tax, collect for the rest of the Nation, and it is wrong.

The exemption for small businesses is a red herring. This so-called exemption doesn't even match up with what the SBA defines as a small business retailer. We know what will happen with the small business exemption. When the States don't get the revenue they want, they will be right back here again looking for us to repeal the small business exemption, saying: It is not fair that this category of businesses has been exempt. They will be looking for more and more, and here we are in Washington letting them trample on the States that made the decision not to have a sales tax. This bill should not go forward.

I want to share some stories from New Hampshire. My constituents have written to me about this. A company in Franconia, which is in the northern part of New Hampshire, calls this a job killer. From Pittsfield, an online coin and stamp dealer says: If policymakers decide to impose new sales tax collection burdens on small businesses and force them to collect and remit 9,600 tax jurisdictions nationwide, the legal compliance and administrative cost alone would undoubtedly make it harder and, in many cases, impossible to enjoy the opportunities and benefits of the Internet marketplace.

This is from a business in Amherst:

Our company is a poster child for small family-run Internet businesses. We have over 80,000 customers nationwide. The burden of collecting and distributing sales tax for this would be prohibitively expensive.

Finally, another constituent from Boscawen believes this would open the door for States to begin taxing across their borders for many other different taxes. Another company from Rindge says:

This bill is absolutely terrifying. I think I may not be able to survive. I may not be significant to many in Washington, but my little machine shop is the center of my family's livelihood.

When I hear my colleagues come to the floor and call this a States rights issue, what about States such as New Hampshire? Why are we going to make this vibrant part of our marketplace, the Internet, a tax collection haven for other States? So businesses in New Hampshire and other States are going to collect taxes for Indiana, and this is all because cash-strapped States are coming here and asking Congress to do this.

By the way, for those who believe this is some kind of conservative bill, this is not my idea of conservative. The Americans for Tax Reform are against this, the Heritage Foundation is against this, the Campaign for Liberty is against this, the National Taxpayer Union is against this, Cato is against this, and the Heartland is against this.

This is not about small government. This is about forcing businesses in States like mine, with no sales tax, to become the tax collectors for the Nation. It is wrong.

This is not about small businesses. I urge my colleagues to vote against the online tax collection act because that is what this really is.

I yield the floor.

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Ms. AYOTTE. Mr. President, I rise in support of amendment No. 297, which has been brought forward by my colleague, Senator Hatch from Utah. I am proud to be a cosponsor of this amendment that establishes a reserve fund to repeal the onerous medical device tax. In fact, the medical device tax is nearly a $30 billion new excise tax on medical devices. It took effect on January 1 to pay for the President's new health care law, and it affects everything from orthodontics to the most complex lifesaving medical devices--just to name a few: joint replacements, knee braces, pacemakers, visual aids for sight-disabled people. It affects things that help people who are ill, such as lifesaving devices and technologies that people need, and this tax burdens all of them, and it will increase health care costs.

I thank Senator Hatch for his tremendous leadership on this issue. He has been fighting so hard to repeal this onerous tax since it went into effect. I thank Senator Hatch for bringing this important amendment forward because the medical device industry in America is a manufacturing success, and I have seen this in my home State of New Hampshire, where we have nearly 50 medical device companies that employ almost 3,500 Granite Staters. We are very proud of those companies, and we want to keep them in New Hampshire and hopefully grow them. When I campaigned for the Senate, I went to visit many of these companies. They told me about this tax and the impact it will have on their companies.

The medical device technology and medical field in this country is a great success story. In 2008 the industry employed over 420,000 workers, generated more than $24 billion in payroll, and paid 40 percent higher salaries than the national average in terms of a job. These are great-paying jobs. They are high-quality, good-paying, sustainable jobs, and this tax is going to make sure we have fewer of those good jobs that Americans want so much right now. With the Nation's unemployment rate still unacceptably high, we should be doing everything we can to create a good climate for American companies so they can strive and make sure we have more economic growth and make sure people have good-quality and high-paying jobs.

If this tax is left in place, the medical device tax will absolutely stifle hiring. For example, 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. I hear a lot of talk from my colleagues about investing. This is something where this tax is basically going to kill good-paying American jobs. It defies common sense. Over 16 percent of respondents to a survey last year said they would reduce staff and employees in order to lower costs before the implementation of this device tax.

In my home State of New Hampshire, a study found that we could lose potentially hundreds of employees due to the cost of this medical device tax.

I had an opportunity to visit one of those companies, Corflex, which is located in Manchester. They manufacture orthopedic medical products. Corflex has seen steady growth over the years. It is a small thriving business in Manchester, NH. When I met with the CEO at Corflex, he showed me their balance sheets. He showed me the balance sheets before the medical device tax went into effect and after the medical device tax went into effect. What he showed me is that they went from being a profitable company to a company that would sustain a loss. This is a great company that was founded by a person in New Hampshire who was an entrepreneur and just had a dream. This tax would change a profitable company into a company that would experience a loss. He said: If this tax is not repealed, it will ultimately force companies, like us, to cut research and development dollars, pass costs on to consumers, or even consider reducing our workforce.

Last year I visited Smiths Medical Facility in Keene, which employs 500 people in New Hampshire. They are doing great work at Smiths Medical. The vice president of global operations of technology told me that repealing the medical device excise tax is about improving patient care and investing in more innovation and jobs.

The medical device tax has sadly already cost the United States thousands of jobs. We need bipartisan action now to repeal this onerous tax that is killing jobs in this country. I know there are Senators on both sides of the aisle who support the Hatch amendment.

For smaller device companies, like many in New Hampshire, this tax hits them even harder. In fact, Teleflex--a Pennsylvania-based company that has a manufacturing plant in Jaffrey, NH--does what many larger medical device companies do: they rely on small companies to do their research and development. The vice president of Teleflex said:

I think the fear is that there is a lot of good that comes out of small medical device companies, and with more costs thrown upon them, it's going to be harder and harder for them to sprout up and make a go of it ..... I think the view in the industry is that this is going to stifle innovation.

Why is this going to stifle innovation? Because this is a tax that is not a tax on profit, it is a tax on revenue. It is a 2.3-percent tax on revenue. What does that do to startups? What does that do to investments? Basically what we are saying is, don't start your new medical device company here with your new idea on how to save American lives because we are going to tax you whether you make a profit or not. That is why this tax is very onerous on startups. It is essentially a tax on innovation.

The device tax also stands to increase health costs, and that is why I don't understand why it was used to fund the President's new health care law--because we are going to see greater costs. In fact, the CMS Actuary, Richard Foster, said he anticipates that the excise tax will generally be passed on to health consumers in the form of higher drug and device prices and higher insurance premiums. It will raise national health costs by a whopping $18.2 billion by the time we reach 2018.

Even though it only went into effect a couple of months ago, we are already hearing about the job losses in this country because of the medical device tax. We heard that Stryker Corporation laid off 5 percent of its global workforce. Covidien, which makes surgical instruments, recently announced the layoff of 200 American workers. And guess where they plan to shift their production. They are shipping it offshore to Mexico and Costa Rica. And that is the other impact of this tax--encouraging new devices to go elsewhere, to plant their new investment in other countries instead of here in the United States of America. That is another horrible impact of this medical device tax. Zimmer said it planned to cut jobs and outsource. The CEO of Cook Medical, the world's largest privately owned medical device company, said it will have about $20 million less to develop and improve patient care and access to technology. We heard so many of these stories about American companies that are being hurt tremendously by this medical device tax.

So what is this about? This is about repealing this onerous tax. This is a tax that taxes innovation, increases health care costs, and also is a tax that kills good-paying American jobs.

Finally, we want the new medical devices to be developed here in this country. We don't want them to be developed in Europe because of an onerous tax. What we are going to see is that Americans are going to have less access to the very new and best products because it is going to become too costly in this country for new companies to develop those products and for startups and, at the end of the day, it will be sad for Americans.

I urge my colleagues to support the Hatch amendment and, again, I thank him for his leadership.

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