Democrats Should Lead in Cutting Medical Device Tax

As we witnessed throughout our mayhem in last year’s midterm election cycle, registered voters are demanding to know what lawmakers will do to create jobs and make health care more affordable. Having the ability to point to tangible, significant achievements in improving health care and the economy, two top-of-mind issues for voters could float all Democratic boats as 2020 looms.

By voting to repeal the misguided medical device tax, Democratic members of Congress can help spur American innovation, support thousands of high-paying jobs and hold health care costs down for their constituents — and own the credit for it.

Taxes provide us with necessary funds for social programs, health care, education and other essential spending. And deficit-growing tax cuts, initiated by Republicans, will cause costly consequences for all of us. Still, the tax on medical devices is a tax that blows up health care costs. It’s a tax that should be repealed because its continuance has economic consequences.

The medical device tax imposes a 2.3 percent levy on a broad range of medical devices and products including pacemakers, advanced imaging technology (CT scan, MRI and ultrasound equipment), artificial joints, dental instruments and even surgical gloves. In effect between 2012 and 2015, the tax has been temporarily suspended by an overwhelming bipartisan vote in Congress several times over the years. But as long as this tax looms, it creates economic headwinds and slows research and development that will have painful downstream consequences for patients by hindering innovation and patients’ access to it.  

At a time when President Donald Trump’s trade policies are threatening economic growth, we can’t afford to allow the short-sighted medical device tax to hang over the heads of our manufacturers and employers. A trade war between the United States and China is already hurting jobs in communities across the country. Nationwide, 21 percent of rural voters — including one in four rural voters in the Midwest — cite economic concerns as the biggest problem facing their local communities. Letting the device tax go back into effect would have the same impact as adding yet another Trump tariff, hurting manufacturing and increasing health care costs even further. 

When it comes to the economy, the U.S. Department of Commerce estimates that the device tax has resulted in 30,000 Americans jobs lost. Since 80 percent of the medical technology industry is made up of small businesses with fewer than 50 employees, with salaries that are 40 percent higher than the national average ($58,000 vs. $42,000), the device tax is bad news for communities that thrive on manufacturing.

Beyond the economic and research and development slowdown attributed to the tax, it hits consumers’ pocketbooks surreptitiously. Health care costs, especially at hospitals, are notoriously opaque, offering consumers zero line of sight. The truth of the matter is we have very little insight into how consumers ultimately pay this tax, but it’s safe to assume they do.

And since affordable health care was the number-one issue for voters this election season — especially among registered Democrats and independents — supporting the repeal of a costly and burdensome provision is a political winner.

Congress voted to suspend the device tax for two more years in early 2018, but the fact that it is still law severely undercuts companies’ confidence to invest in the research and development necessary to continue creating innovative breakthroughs and maintaining American leadership in the medical technology industry. In addition to stifling innovation, the tragic, but all too predictable result is higher costs and worse outcomes for Americans’ health care.

Critics may argue that repealing the device tax is in line with Trump’s agenda to further enrich the wealthiest 1 percent through 2017’s awful tax cuts, but the two issues are fundamentally different. Unlike the historic handout that was rammed through Congress, repealing the device tax would put jobs back in our manufacturing communities and breathe some positive life into the health care industry instead of putting billions back in the pockets of plutocrats. Repealing the medical device tax would encourage companies to once again invest tens of billions in innovation and expansion, which could lead to a much-needed economic explosion in rural areas across the country.

It’s time for Democrats in the House and Senate to lead and finish the job — so thousands of Americans can go back to theirs.

Democrats will make a real difference if they take leadership on repealing the medical device tax. Repealing this tax creates jobs, contains health care costs and gives our Dems needed bragging rights in the leadup to 2020.  

Julianne Malveaux is an economist, author and president emerita of Bennett College for Women.

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