The United States has long been a leader in medical technology innovation and discovery, and Wisconsin has been a leading state in medical breakthroughs and medical device manufacturing.
Unfortunately, we have tax policies, including the medical device tax, that have stifled innovation and job creation, putting our research and technological leadership at risk.
Fortunately, lawmakers such as House Speaker Paul Ryan, R-Janesville, and U.S. Rep. Ron Kind, D-La Crosse, have long understood the negative consequences of such policies on medical innovation, jobs and the U.S. economy.
The U.S. medical device tax, implemented in 2013, is a burdensome 2.3 percent excise tax on medical device manufacturers. Thanks to Speaker Ryan, Kind, Sens. Tammy Baldwin, D-Madison, Ron Johnson, R-Oshkosh, and others, this tax was temporarily suspended in late 2015 with strong bipartisan support.
The temporary two-year suspension of the tax has given medical technology companies — including GE Healthcare and dozens of other large and small medical technology manufacturers in Wisconsin — opportunities to redirect their savings into research and development, their employees and communities.
According to Jay Hill, general manager of imaging technology for GE Healthcare, his company has been able to grow its servicing hub in Oak Creek and improve its lab in Waukesha, which attracts young people to advanced manufacturing. He attributes this directly to suspension of the medical device tax.
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The economic and human impact of medical innovation is hard to overstate. The medical device industry is an important and thriving sector in the U.S. economy, creating jobs in all 50 states and representing a sizable portion of the nation’s economic output. Here in Wisconsin, the medical device industry contributes about $8.9 billion to the state’s economy and is responsible (directly and indirectly) for more than 48,000 high-quality, well-paying jobs.
The industry is proof that fostering innovation can lead to positive outcomes. Yet without permanent repeal of the device tax, uncertainty looms. This tax, if it isn’t stopped again, would inhibit life-changing innovations while weakening job creation and economic growth.
Research and development require significant capital investments over many years. And that impacts every aspect of a company’s innovation cycle, from workforce retention and job creation to employee compensation and benefits, facility expansion and the medical device pipeline itself.
There are “ripple effects” as well, because medical innovation supports collaboration with universities, independent institutions and medical centers.
The two-year suspension of the device tax was a good start. Also encouraging is congressional approval of the 21st Century Cures Act, which will improve the innovation ecosystem and accelerate breakthroughs.
Full repeal of the device tax is the next logical step.