, Salem, MA


April 27, 2013

Column: Where the Senate candidates stand on the device tax

As the race for Massachusetts’ vacant U.S. Senate seat heats up, candidates will be asked to address many of the problems state residents face. One of the most immediate is a new tax on medical devices, part of the financing for the Affordable Care Act.

The tax kicked in Jan. 1 of this year, and the first round of payments is due April 30. It will have a drastic impact on one of the commonwealth’s major industries, and hits locally at Analogic Corp. and Abiomed Inc. to the tune of more than $6.6 million next year.

Massachusetts is home to more than 400 companies that focus on medical devices, making the commonwealth among the nation’s top employers in the industry. It is in this context that some are concerned about the lasting impact of a new tax on current employment, future job growth, prospective innovation, and health care costs.

A study just released by Pioneer Institute estimates that the tax means Massachusetts’ 19 largest medical device companies will be sending an additional $422 million to Washington each year.

According to a recent survey conducted for the Massachusetts Medical Device Industry Council, half of companies plan to reduce their budget for research and development. Forty-four percent of companies plan to pass the tax’s cost straight onto the end users. In other words, it will translate to an increase in either to out-of-pocket expenses or insurance premiums. The survey also found that 39 percent of companies will attempt to cut internal spending, and 25 percent will immediately shrink the size of their workforce.

The provision was dubbed by Democratic Senator Al Franken of Minnesota a “job-killing-tax,” and some national companies have already started to lay people off. In Massachusetts, what will happen to the 24,000 directly employed in the industry — not to mention the 82,500 additional jobs that are working in related companies — is an open question.

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