Suspension of medical device tax good news

(Bloomington) Herald-Times

A budget agreement crafted with support of both Republicans and Democrats in Congress should be considered good news for the nation, simply because leaders of both parties worked together to come up with something that will keep the government open into the first of the year. Passage this week would eliminate the need for the kind of brinksmanship that has sullied Washington decision making in recent years.

In addition to that broad view, the agreement includes good news for Hoosier industries such as Cook Medical. It would suspend the 2.3 percent excise tax on medical devices for two years. That tax bill alone for Cook Medical adds up to tens of millions of dollars, which could be used for research, development and production in an industry focused on making people live healthier and longer lives with higher quality.

The tax has been part of the payment mechanism in the Affordable Care Act. Officials from Cook have criticized it from the beginning and have said it has had a real impact on expanding job opportunities in the United States.

One significant problem — the tax is on sales, not profit. Here’s how that math works: A company has sales of $1 million and a profit margin of 10 percent, or $100,000. It pays $23,000 in taxes, which amounts to 23 percent of its anticipated profit. That’s way too steep.

U.S. Sen. Dan Coats has made repeal of the medical device tax his top legislative priority since before it was even implemented in 2013. In a statement released last week, he called the device tax a “bad policy” that is “unfairly punishing a successful industry that provides good jobs to thousands of Hoosiers and enhances the lives of patients around the world.” We agree with him when he says a two-year suspension is a step in the right direction.

This budget bill gives Republicans victories on a lot of key tax areas, but Democrats get some things, too, such as extending tax breaks for assisting low-income families.

In addition, the bill skirts social issues; it does not block federal money to Planned Parenthood.

It appears there are things for each party to like and dislike, which is how the best of such major policy decisions should come out. When neither side gets everything it wants, the American people are more likely to have a good result.

In this case, Hoosiers win with the temporary suspension of the medical device tax. About 20,000 people work in that industry in Indiana. The tax has been seen as having a drag on that sector of the state economy, and in a more global sense, in slowing the development of important medical discoveries and breakthroughs.

This agreement by congressional leaders still must pass the rank-and-file. Hopefully, that will happen yet this week.

This was distributed by Hoosier State Press Association.