Over the last couple years, there have been numerous attempts to get rid of the 2.3% medical device excise tax. With the Republican-controlled Congress, there is some speculation that this could be the year a repeal happens. Repeal has had bipartisan appeal to legislators from states with large medical device industries, like Massachusetts, Minnesota, and California.
Both House and Senate budget committees recently included repeal of the device tax in their federal budget proposals, winning praise from JC Scott, senior executive vice president of the Advanced Medical Technology Association. While many lawmakers would like to see the tax repealed, there has not been consensus on how best to replace the tax revenue.
This week, Senator Ed Markey (D–MA) introduced a bill to repeal the medical device tax and he says he has a way to make up for the lost tax revenue: oil and gas money. His view is that the oil and gas industry no longer needs long-standing tax breaks and that medical device innovation should be supported instead. Markey's "No Taxation on Device Innovation Act" calls for the device tax to be pulled and for almost $30 billion in oil and gas tax breaks, loopholes, and subsidies to pay for its repeal.
Markey has been vocal on energy, oil, and gas issues. Most recently, he has voiced opposition to lifting the ban on crude exports, pushed against a proposal for new offshore oil drilling along the Atlantic coast, and urged Senate Republicans not to overturn new fracking regulation.
Markey states that the medtech industry "directly supports 23,900 jobs and approximately adds $17.6 billion" to Massachusetts' economy. In a press release announcing his bill, Markey said, "It's time to end 19th century tax breaks for highly-profitable oil and gas companies that need no assistance and invest in 21st century innovation and companies that create jobs and save lives. The No Taxation on Device Innovation Act trades oil and gas company corporate welfar for the health and welfare of the American people and economy."
Thomas Sommer, president of the Massachusetts Medical Device Industry Council (MassMEDIC), said in the press release, "The repeal of the medical device tax would provide immediate relief for over 400 medical device manufacturers in Massachusetts. As Massachusetts is home to the second largest concentration of medical device development and manufacturing in the nation, medtech companies in the Commonwealth have shouldered a disproportionate share of this tax."
The details of Markey's legislation includes repealing the 2.3% device tax which is expected to generate approximately $29 billion in tax revenue over the next ten years and replace that money by getting rid of the last-in, first-out (LIFO) inventory accounting method for the largest oil companies and requiring oil companies to pay royalties for additional offshore drilling leases in the Gulf of Mexico. The elimination of the LIFO accounting method would generate $14.1 billion over ten years while the royalties would bring in $15.5 billion over ten years, according to the bill.
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