From the Pioneer Press: Erik Paulsen: Medical-device tax could whack Minnesota companies

By Erik Paulsen

The national unemployment rate in the United States recently hit a 26-year high of 9.8 percent. Minnesota, despite a lower unemployment rate, also continues to lose jobs and suffer under the weight of the ongoing economic recession.

Unfortunately, these unemployment problems could be exacerbated if Congress adopts the health reform proposal finalized by the Senate Finance Committee last week, which includes a nearly $40 billion tax on American medical manufacturers. There is still the possibility of the House of Representatives including a similar tax in a final health care reform package.

The impact of this tax – which will hit manufacturers of technologies common in modern medicine, such as pacemakers, stents and MRI scanners – would have a disastrous impact in Minnesota.

Minnesota is one of the top medical technology alleys in the world. We are among the top five states in the entire country for medical technology jobs, with about 20,000 direct jobs and tens of thousands more related jobs in the industry. Home to some of the top medical-device manufacturers in the nation, Minnesota also boasts more than 200 small- to medium-sized medical and bio-technology firms and companies.

The problems with this tax are numerous, but the primary one is simple: It will kill jobs. I’ve heard directly from Minnesota medical technology companies, both large and small, that this tax will result in employee layoffs. Several states around the country with high numbers

of medical device manufacturers would surely face a similar fate.Medical technology is a vital export industry for both Minnesota and the entire country, generating tens of billions of dollars in international sales. Given the state of our economy, we should be looking at every possible option to open markets and increase opportunities for our job creators. This tax would have the exact opposite effect.

Especially concerning is that this tax will burden many smaller Minnesota medical technology companies that face financial challenges and heavy start-up costs as they seek new breakthroughs. If companies are faced with a massive new tax increase, the result will inevitably be a slower pace of breakthroughs, at best. At worst, the tax will serve as a serious disincentive to expand jobs and seek new growth.

Along with the negative impact on jobs, a medical device tax will stifle innovation and reduce the number of life-saving technologies that many of these manufacturers continue to develop. As is the case with nearly any tax increase on private industry, increased costs are not simply absorbed. They are passed on to consumers or pulled from critical areas like research and development – or sometimes both. In the end, patients will pay more for fewer medical technologies.

Only in Washington would people proclaim to lower the cost of health care by taxing it and making it more expensive.

As co-chair of the House Medical Technology Caucus, I am committed to protecting the thousands of jobs and numerous life-saving technologies created by the medical device industry here in Minnesota. Along with joining Reps. Betty McCollum and Michele Bachmann in expressing concerns with the Senate’s innovation tax proposal, I’m fighting to ensure any health care reform legislation in the House does not include this misguided tax.

To that end, I will hold a field hearing today in Plymouth to further examine this issue. The hearing, entitled “The Impact of the Medical Device Tax on Jobs, Innovation, Patients and the Cost of Health Care,” will include testimony from several representatives within the medical technology community in Minnesota. I’m hoping this will help draw further attention to the real-world impact of this proposal.

Congress should examine each action it takes through the lens of job creation. The negative impact of the proposed medical device tax is a perfect example of why we must do so and I’m proud to be working with colleagues from both sides of the aisle in order to help, not hinder, Minnesota job growth.

Erik Paulsen, a Republican from Eden Prairie, represents Minnesota’s Third Congressional District in the U.S. House of Representatives.

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