Congressman Aaron Schock (R-IL), a member of the House Ways and Means committee, repealed today another tax raising provision in President Obama's Affordable Care Act. Schock is a co-sponsor of the bipartisan Protect Medical Innovation Act, H.R. 436, that was approved by the Ways and Means committee and is expected to pass the House next week. H.R. 436 repeals the medical device tax that will impose a 2.3 percent excise tax on the manufacturing of medical devices beginning in 2013.
"It's estimated that the implementation of this tax increase would result in the loss of 1,209 Illinois jobs, which is a clear indication that raising taxes, whether it's on individuals or private business, is not smart economics," said Congressman Aaron Schock. "The reality is this tax will stunt the minimal economic growth we are seeing and will set back small businesses and manufacturers and hurt local communities with the added pain of an additional tax increase. This is just the latest example of the litany of costly regulations and tax policies that continue to come out of the Obama Administration."
Over 400 organizations, companies and manufacturers, including twenty in Illinois, representing hundreds of thousands of medical technology jobs have written Congress urging for the repeal of the medical device tax. In November 2011, Schock joined with over 40 bipartisan, bicameral members in writing a letter to Food and Drug Administration Commissioner Margaret Hamburg expressing concern about regulatory issues facing the medical device industry, which is another area of concern for an industry that has become a hallmark of success for the United States.
Canton, Illinois is a text book example of a small Illinois community that is expected to be adversely impacted by the pending tax increase on medical devices. In May 2011, Cook Polymer Technology, a raw materials manufacturer, announced it was expanding its operations by opening a new plant in Canton. The Canton facility, which is now fully operational, has provided a much needed jolt to the local economy and the creation of 100 new jobs. However, with the pending tax increase on the products the facility manufacturers, such as highly specialized polytetrafluoroethylene (PTFE) tubing widely used by the medical community, there is concern that their ability to grow locally and reinvest in the Canton community will only become more restricted because of the pending new medical device tax.
"Canton is a small Midwestern community that has suffered through factory closings, industry changes and people moving to find jobs. In the past couple of years, Cook Medical has brought two manufacturing facilities to our town that have turned this city around. Our unemployment rate has dropped a full percentage point and we are seeing a revitalization of our downtown," said Kevin Meade, Mayor of Canton, IL. "This device tax is taking the money that a company like Cook would use to bring jobs and opportunities to places like Canton, and it's crippling economic growth at just the time this country needs it the most."
"This tax will lead to jobs being transferred outside the U.S., the loss of future new jobs being created inside the U.S., and delays in the latest medical innovations to Americans patients. Americans want their critical devices manufactured in the U.S. and to have access to the latest medical technologies. Our Canton community shows what can happen when American companies invest in American communities. It could be replicated in hundreds of towns across the U.S. but that won't happen with this tax in place," Steve Ferguson, Chairman of Cook Group, Inc.
Effective in 2013, the Affordable Care Act will impose a 2.3 percent excise tax on the manufacturing of certain medical devices unless it is repealed. A 2011 AdvaMed study found the medical device tax places 43,000 jobs at risk with a corresponding loss of $3.5 billion in wages, which will have adverse impact on small and mid-sized companies as well as the communities where they are located. A majority of the medical device industry is made up of small to midsized businesses, with 80 percent of these companies having less than 50 employees and 98 percent with less than 500 employees. The medical device industry employs more than 400,000 workers nationwide; generates approximately $25 billion in payroll; and invests nearly $10 billion in research and development annually. The United States exports $5.4 billion more in medical technology than it imports annually and accounts for 40 percent of the global medical technology market. H.R. 436 currently has 238 bipartisan co-sponsors.