Revenue-neutral proposal fueled by ending tax breaks and free-drilling loopholes for oil and gas companies
Washington (March 24, 2015) – Senator Edward J. Markey (D-Mass.) today introduced legislation that would repeal the medical device tax and pay for the repeal by ending tax giveaways and closing free-drilling loopholes for oil and gas companies. The “No Taxation on Device Innovation Act” eliminates the 2.3 percent medical device excise tax in the Affordable Care Act and pays for repeal by ending more than $29 billion in tax breaks for oil companies, free-drilling loopholes and taxpayer subsidies for the oil and gas industry over the next decade. The United States is home to more than 7,000 medical device companies that directly employ more than 400,000 individuals in high-skilled and high paying positions and indirectly support nearly two million additional U.S. jobs. In Massachusetts alone, the industry directly supports 23,900 jobs and approximately adds $17.6 billion to the Commonwealth’s economy. The oil and gas industry, whose top five companies made $93 billion in profits in 2013 alone, will receive more than $70 billion in tax breaks and subsidies over the course of the next decade.
“Medical device companies in Massachusetts and across the country are at the forefront of a biomedical revolution that is supporting economic growth and developing life-saving technologies,” said Senator Markey. “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 welfare for the health and welfare of the American people and economy.
“This legislation is a fair and deficit-neutral solution to repealing the medical device tax that ensures continued investment in an industry that is at the heart of the Massachusetts innovation economy. I hope my colleagues will support this legislation that promotes fairness, innovation and economic growth,” said Senator Markey.
“We are grateful to Senator Markey for his leadership in eliminating this punitive tax on medical innovation. The repeal of the medical device tax would provide immediate relief for over 400 medical device manufacturers in Massachusetts,” said Thomas J. Sommer, president of the Massachusetts Medical Device Industry Council (MassMEDIC). “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.”
A copy of Senator Markey’s legislation can be found HERE.
The No Taxation on Device Innovation Act:
· Repeals the 2.3% medical device excise tax. This tax is projected to collect approximately $29 billion in excise tax revenues over the next ten years.
· Repeals Last-In, First-Out (LIFO) accounting for the largest oil companies ($14.1 billion over ten years): LIFO allows oil companies to value their inventories at deeply discounted prices. The Obama administration already has called for a repeal of LIFO for companies across all industries, and this legislation would repeal it for major, integrated oil companies, generating at least $14.1 billion over ten years, according to the Joint Committee on Taxation.
· Closes a loophole that allows oil companies to drill for free on public lands offshore in the Gulf of Mexico ($15.5 billion over ten years). This provision would require oil companies to renegotiate their faulty leases to pay royalties if they wish to obtain additional leases to drill offshore.
The medical device tax, which took effect in January 2013 as part of the Affordable Care Act, applies to everything from surgical tools to defibrillators, and is expected to generate $29 billion in revenue over ten years. The medical device industry points to the impacts of the tax, including reduced research & development expenditures and decreased certainty for plans for medtech workforce expansion. There is also the additional burden the tax places on innovators and small businesses since it is levied on medical device sales regardless of whether the company is making a profit.