BOSTON — While much of corporate America will enjoy a tax cut in the new year, one industry is getting a tax increase it has fought hard but so far unsuccessfully to avoid.
A 2.3 percent excise tax on medical device manufacturers was reinstated Jan. 1 after a two-year hiatus. It was originally imposed in 2013 in the Affordable Care Act.
The tax was strongly opposed by the $150 billion a year industry that produces everything from catheters to heart stents to artificial joints. In Congress, it was unpopular not only with Republicans but many Democrats from states like Massachusetts and Minnesota with large numbers of medical device companies.
Congress voted to suspend the tax for 2016 and 2017 with the widespread expectation it would be permanently abolished before 2018. But various GOP efforts to repeal the Affordable Care Act and the taxes associated with it failed, and the sweeping federal tax overhaul didn’t eliminate the medical device tax either.
Industry groups Including the Advanced Medical Technology Association and the Medical Imaging & Technology Alliance warn the tax will take a $20 billion bite out of the industry over the next decade.
“What we have seen from past experience is that it comes out of funding for product development, research and the jobs associated with those things,” said J.C. Scott, AdvaMed’s head of government affairs. “We fear we will see employment freezes or reductions and a slowdown in the pipeline for medical innovation.”
The slashing of the corporate tax from 35 percent to 21 percent may soften the blow for some manufacturers, industry officials say. It will fall harder on smaller firms and startups.