Tags: jobs | medical device tax | Congressional Research Service

Low Job Impact From Medical Device Tax Projected

By    |   Wednesday, 14 Jan 2015 03:02 PM

The non-partisan Congressional Research Service projects that the impact of the medical device tax on jobs will be much lower than medical device companies and other opponents of the tax have claimed.

The medical device tax was passed as part of Obamacare in 2009, but has faced bipartisan opposition since. It places a 2.3 percent tax on medical devices ranging from X-ray machines to surgical gloves.

The medical device industry has lobbied against the tax, claiming that if it isn't repealed, it will result in the loss of tens of thousands of jobs as well as hurt research and development.

According to a report filed by the Congressional Research Service in November, the projected job loss is "probably no more than 0.2 percent" of related jobs, making the maximum impact 1,200 jobs, depending on how consumers respond.

"These small effects occur in part because the tax is small, in part because the demand is estimated to be relatively insensitive to price, and in part because approximately half of production is exempt from the tax," the report states.

The non-partisan research group also concluded that "the relatively small effects on the industry suggest that innovation and research would be minimally affected."

Other studies have projected that the job loss, as a result of the tax, could be as low as 4,700 or as high as 43,000.

The medical device tax went into effect in January 2013 and is supposed to bring in a net of $29 billion over 10 years.

The Congressional Research Service explains that according to "traditional economic and tax theory" that "the tax is challenging to justify."

Taxes are usually "more efficient" when trying to raise money "from a broad tax base," it says.

And excise taxes are typically imposed to either discourage an activity, such as taxes on cigarettes to discourage smoking or to raise money to fund a related project such as gasoline taxes that help to fund highway infrastructure projects.

"These justifications do not apply, other than weakly, to the medical device case," the group says.

"The tax also imposes administrative and compliance costs that may be disproportionate to revenue," it adds.

The Congressional Research Service notes that "the medical device market has not previously been subject to an excise tax." It predicts that the tax will be absorbed by the consumer in the form of increased prices.

The medical device tax may be one of the first issues to hit the chopping block under the new Republican-led Congress as there are lawmakers on both sides of the aisle who support its repeal.

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The non-partisan Congressional Research Service projects that the impact of the medical device tax on jobs will be much lower than medical device companies and other opponents of the tax have claimed.
jobs, medical device tax, Congressional Research Service
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2015-02-14
Wednesday, 14 Jan 2015 03:02 PM
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