There’s a saying, “tax what you want less of, and subsidize what you want more of.” So why are we taxing the medical device industry – the very people who create the life-saving technologies that have made our country’s health outcomes so great? Do we want less innovation, and fewer products, or what?

Suggestion #21: Repeal the tax on medical device manufacturers.

This provision of last year’s health care reform bill imposes a 2.3 percent excise tax on medical device makers’ revenues from goods that retail for over $100 (think things like prosthetic limbs, surgical instruments, and dental implants).

In “Comprehensive List of Tax Hikes in ObamaCare,” Ryan Ellis at Americans for Tax Reform points out that this provision goes into effect in 2013, and raises $20 billion over ten years. Much like the 1099 reporting provision of the health care reform bill (Day 18 of the “30 Ideas” series, for those of you keeping track), the tax on medical device manufacturers was inserted as another revenue-raising measure. (To be charitable, at least this one is health related, I guess – but that’s the only nice thing that can be said.)

Officially, this tax will be paid by companies – but at the end of the day when we cut into these corporations’ bottom lines, that’s less money they have for research and development, for hiring workers, and for investing in growing their business. The prices of these medical device products will go up – obviously, the companies are going to pass this tax on to consumers, and not just accept a lower bottom line – which will hurt individuals and drive up costs for insurance companies. According to Politico, the industry employs approximately 2 million people – a number that’s soon to fall, given that some companies are thinking about moving overseas. Of course, these dynamic effects weren’t considered in CBO scoring of the bill…

To avoid severe damage to the economy, it is imperative that Congress abolishes the tax on medical device manufacturers. We need to keep our medical device industry strong, so they can discover the next great medical innovations of the 21st century.