Medical device tax: We need action by summer, Paulsen says

Capitol Hill

Rep. Erik Paulsen (R-Minn.), an unrelenting opponent of the medical device tax that took effect at the start of the year, still sees avenues for repeal tied to larger discussions of corporate tax reform.

The tax is especially significant to Paulsen’s hometown, which houses some of the largest medical device makers in the industry, including Medtronic (NYSE:MDT) and St. Jude Medical (NYSE:STJ), but the Congressman was more concerned about the little players in an on-air interview.

"It’s not just the larger companies like Medtronic or Boston Scientific – there are 400 of these smaller companies, medical technology companies in Minnesota, that will be impacted by the new tax," Paulsen told KMSP-TV Fox 9 news. "This tax is not a tax on profit for companies, this is a tax on their sales, on their revenue, and for most companies that are medical device companies it takes 10-15 years to achieve profitability, sot this is the time to push the panic button."

Paulsen’s aides told MassDevice.com last month that the Congressman plans to reintroduce legislation to repeal the 2.3% levy, which was created to help fund elements of President Barack Obama’s Affordable Care Act.

Paulsen’s original bill, which last June successfully passed 242-173 in the House of Representatives, must start from scratch after the Senate failed to act on the legislation during the 112th congress. The prior House win no longer applies now that a new Congress has been seated.

Read more of MassDevice.com’s coverage of the medical device tax.

In the recent interview Paulsen ceded that repealing the tax would be more difficult now that it has become law, with the 1st payments due to the IRS at the end of last month, but he foresaw new opportunities to discuss the tax and its impact on U.S. medical device makers during discussions about corporate tax reform.

"This is about keeping good, domestic manufacturing jobs here in the U.S., not shipping them overseas, and that’s a part of the larger tax conversation that needs to happen," Paulsen said. "So this year – late spring, early summer – we need action."

Medical device industry lobbying groups have similarly pointed to U.S. corporate tax reform as an arena in which they may find supporters for repealing the device tax.

A trio of the largest U.S. medtech groups late last month bandied together to reaffirm their commitment to taking down the tax, even though the industry lost valuable ground when the tax was left out of the fiscal cliff negotiations at the end of the year.

"Instead of investing in new medical technologies or creating new jobs, innovators across the U.S. wrote a check to the IRS this month," Medical Device Manufacturers Assn. president Mark Leahey said in prepared remarks.

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