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February 18, 2013

Our View: Medical devices shouldn’t get tax break

The Free Press

— In a rare instance of cooperation, Minnesota Republicans and Democrats in Congress have united to try to repeal a new medical device tax.

In this case, the bipartisanship is being used in a misplaced effort.

The reason for the camaraderie by Republican Rep. Erik Paulsen and Democratic Sens. Amy Klobuchar and Al Franken is simple to understand — Minnesota has a big and powerful medical device industry, including Medtronics and St. Jude Medical, that doesn’t like paying the tax.

The tax was part of the legislation to fund health care reform and put most all Americans on some kind of health insurance. The medical device industry already won a major concession when it got the proposed tax cut in half to 2.3 percent, which will raise about $2.9 billion a year when it kicks in next year.

The medical device industry is not being singled out. All industries tied to health care, from insurance companies to drug companies, knew they’d have to help pay for some of the cost of health care reform.

And the industry’s stark warnings of job cuts and a reduction in innovative new discoveries are at best overstated.

A Bloomberg Government analysis done last year concluded the medical industry’s claims of massive job cuts that would be triggered by the tax were “not credible.”

 When a push was made last session to repeal the device tax, proponents suggested replacing the lost revenue by trimming insurance subsidies for low- and middle-income workers under the health care law. That’s a callous proposal that would undermine health reform and put more burden on the working poor so as to give a tax break to corporations.

The only reason this issue is still alive is because of the extraordinary influence of special interests like the medical device industry.

And it is another example of why carving so many loopholes into tax law in the first place is a bad idea. Every exemption from taxes given to some favored industry means everyone else — particularly those with less influence and means — end up paying more.

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