Medical device tax: A hat trick of futility (MassDevice)
The medical device tax has achieved such a hat trick of futility that you couldn’t blame medtech for boycotting the 2.3% excise levy.
The medical device tax is like a bad public school teacher: It’s a drain on the system and seemingly impossible to get rid of.
In just 21 months, the 2.3% levy has achieved a unique hat trick of futility. How else could you describe a tax that’s highly inefficient, fundamentally ineffective and disproportionately damaging to 1 of the few net exporting industries left in the U.S.?
In recent months, we’ve learned that the following about the medical device tax:
- The IRS collected only $1.4 billion in medtech tax revenues in 2013, as revealed in a MassDevice.com exclusive, far shy of just about every estimate.
- The IRS “cannot identify the population of medical device manufacturers“ ought to be making semi-monthly deposits on the tax, according to the U.S. Treasury Dept. The IRS collected a little more than $913 million during the 1st half of 2013, well shy of the $1.2 billion it expected.
- The IRS wildly overestimated the number of medical device tax returns filed during the 1st half of 2013 (9,000-15,000) versus the roughly 5,100 returns medtech companies actually filed
The Affordable Care Act forecast that the medical device tax would raise $30 billion over 10 years to help defray the cost of providing health insuranceto millions of the uninsured. At this rate it will raise nowhere near that amount. And another key rationale, that the cost of the tax would be offset for medtech firms by increased business from the newly insured, has proven to be wildly off. Procedures are down overall and medical device sales have tapered overall to the low single digits in the last few years.
Earlier this month, the House of Representatives approved the “Jobs for America Act,” a package of bills that included a measure that would roll back the medical device tax and issue a retroactive refund to medical device companies.
There’s even speculation that the collections gap indicates that some medtech companies are boycotting on the tax.
“I’d be surprised to find many – if any – in our community who haven’t paid the tax. We focused our [device tax education] program on smaller and mid-size companies and made sure they had access to expertise,” LifeScience Alley CEO Shaye Mandle told the Minneapolis Star-Tribune. “Nobody is skirting this tax.”
Still, could you blame a company for at least flirting with the idea of a boycott?They won’t get any help from Washington before the mid-term elections; after the House rammed through its repeal-and-replace measure, it promptly went on recess until after the November elections.
It’s time to fix this mess once and for all.