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March 02, 2017 12:00 AM

Vital Signs: Report reveals device tax killed 28,000 jobs, and could kill 25,000 more

Adam Rubenfire
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    Devicemakers have long complained that their business has been harmed by an excise tax placed on their devices by the Affordable Care Act. A think tank has now crunched the numbers on how the tax affected U.S. jobs.

    The 2.3% tax on medical device sales resulted in the loss of over 28,000 jobs among devicemakers and and related industries when it was in effect between 2013 and 2015, according to the American Action Forum, which describes itself as a “center-right policy institute.” Health economist Robert Book based his post on U.S. Census Data and tax data from the federal government.

    The tax, which is collected as a direct percentage of manufacturer sales, was suspended by Congress for 2016 and 2017. If Congress allows it to resume in 2018, AAF projects that an additional 25,000 additional jobs could be lost by 2021. AAF's prediction is based on past job losses and lower-than-anticipated tax revenue, which would suggest a reduction in device sales.

    Census data shows that there was some job recovery in 2015, possibly from optimism when Congress passed the two-year suspension of the tax. Actual employment numbers aren't available for 2016; AAF expects those figures will show modest growth, but not a return to pre-tax levels given the uncertainty about whether the device tax will be reinstated.

    If Congress takes action to permanently repeal the tax, AAF believes the previously lost jobs would be reinstates by manufacturers within three to five years. Job growth is a major platform issue for President Donald Trump, who vowed during his campaign that he'd push for a repeal of the tax. Many congressional Republicans have also supported elimination of the tax as a catalyst for a larger repeal of the Affordable Care Act.

    But some GOP lawmakers and health policy experts have warned that eliminating income from taxes like those on devices and “Cadillac” high-value employer plans would result in too large of a revenue loss for the federal government, leaving Congress and the Trump administration with no clear way to pay for the ACA's replacement. The Congressional Budget Office estimates that the repeal of the tax on medical-device makers alone would cost the government $24 billion in lost revenue by 2025.

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