Indiana Gov. Mike Pence sent a letter to President Barack Obama on Monday asking him to work with Congress to repeal a 2.3-percent excise tax on medical devices that is helping to pay for the federal health care law.
Pence said the law – which took effect Jan. 1, 2013 – has had a negative impact on the economy and jobs in Indiana and across the country.
“Repealing the medical device tax will allow companies to expand and grow jobs, not only in Indiana but across our great nation,” Pence said in his letter. “This thriving industry should be allowed to innovate and grow, rather than be hampered by an industry-specific tax.”
The tax is expected to generate about $29 billion over 10 years, according to the Joint Committee on Taxation. That money is being used to pay for subsidies to help lower- and middle-income Americans buy health insurance.
The tax is levied on equipment, stents, pacemakers and other devices manufacturers sell to hospitals and other health care providers. But it doesn’t apply to medical equipment – such as hearing aids – that are sold directly to the public.
A number of Indiana lawmakers – including both of the state’s U.S. senators – have advocated for the elimination of the tax, in part because the state is home to several key medical device manufacturers.
U.S. Sen. Joe Donnelly, D-Ind., sponsored legislation to eliminate the tax and said last year that he supports repeal “because it makes sense for Hoosier businesses, workers, and the patients who use their products.”
But Obama previously threatened to veto bills to eliminate the tax. The White House has said the health care industry – including medical device makers – will benefit from additional customers as millions more Americans get insurance through the Affordable Care Act.
But according to Pence, the state’s medical device companies are moving work overseas or cutting costs.
“I have heard from many Indiana-based medical device companies – small and large, start-ups and well-established – that have reduced research and development at their facilities or reduced wages for their employees,” Pence wrote in his letter to the president.
The letter also said that Indiana is second in the nation in exports of life sciences products at a value of more than $9.7 billion. The industry employs more than 55,000 Hoosiers – with 20,000 of them employed directly in medical device-related jobs.
But supporters of the tax say it should not drive companies overseas. According to the left-leaning Center on Budget and Policy Priorities, the tax applies equally to imported and domestically produced devices. That means devices produced in the United States for export are tax-exempt.
“The excise tax is sound,” the center says in a report, “and the arguments against the tax don’t withstand scrutiny.”
Pence tried before to convince Obama and Congress to repeal the medical device tax but legislation has never made it to the president’s desk.