Why does the entire Minnesota delegation want to kill a key part of Obamacare?

REUTERS/Michael Buholzer
The U.S. is the world’s leading market for medical devices: the sector accounted for $110 billion in business in 2015.

Ever since President Barack Obama’s landmark health care law was passed in 2010, Minnesota’s representatives in Congress have argued over whether it’s been a boon or a bust, and voted — repeatedly — to repeal it or keep it.

They all agree, however, that one part of the Affordable Care Act is terrible: the 2.3 percent tax levied on sales of medical devices. Whether they’re Republican or Democrat, from the city, suburbs, or rural areas, Minnesota’s lawmakers will unfailingly tell you that the medical-device tax is a job-killing, innovation-stifling deadweight on one of America’s most promising industries — and one that just happens to have an outsized footprint in the North Star State.

Third District Republican Rep. Erik Paulsen has been the House’s lead crusader against the tax, but even Democrats who may like and support Obamacare — Sen. Amy Klobuchar, Sen. Al Franken, Reps. Keith Ellison, Betty McCollum, Tim Walz, Rick Nolan — have enthusiastically contributed to the painstaking, five-year quest to get rid of the 2.3 percent tariff on medical devices. They recently scored a huge victory, successfully passing a two-year suspension of the tax as part of December’s year-end budget deal, putting it on pause until December 2017.

How did Minnesota’s ideologically, geographically diverse congressional delegation line up behind not just a tax cut, but against something that was once considered a key component of Obamacare?

A huge presence in Minnesota

Even compared to big states like California and New York, Minnesota is a driver of the U.S. medical device economy; Minnesota has the highest concentration of firms and employees in the country. According to the Minnesota Department of Employment and Economic Development, 28,731 Minnesotans are directly employed by about 610 companies in the medical device sector, trailing only California in the raw numbers, and ahead of New York, Florida, Pennsylvania, and Texas.

What is a medical device, exactly? The functional definition, at least under Obamacare, is extremely broad. Devices that were taxed by the law include what might first come to mind — cutting-edge, expensive items like artificial hearts or ultrasound machines. But the category also includes more everyday items, like crutches and bandages (though an exemption built into the law excludes from the tax items that are marketed to the general public and not primarily intended for use by medical professionals only).

The U.S., the world’s biggest health care spender, is also the world’s leading market for medical devices: the sector accounted for $110 billion in business in 2015, and is projected to grow by another $23 billion this year. As of 2014, U.S. firms accounted for two-thirds of the total revenue collected by the world’s top 40 medical device firms, with Germany in a distant second.

The economic footprint of Minnesota’s medical-device industry goes beyond those directly employed by medical device firms, too. The industry’s supply chain and broader ecosystem supports as many as 100,000 jobs in Minnesota, according to Medical Alley Association, the state’s leading trade group for the medical technology sector. Medical Alley estimates that the industry generated $3.8 billion in economic impact, which it defines as total wages paid to industry employees.

The story of how Minnesota grew into a medical technology powerhouse began in 1949, when the global giant known as Medtronic set up as a medical repair shop in northeast Minneapolis. Other big companies sprouted up in the Twin Cities area in the following decades — including St. Jude Medical and Starkey Hearing Technologies.

By the 1980s and 1990s, there were enough specialized resources and talent that the Twin Cities became a magnet for new firms and those looking to expand from out-of-state. And over the last decade, Minnesota has been the fastest-growing medical tech state in the country, ahead of California and Massachusetts, according to Shaye Mandle, president and CEO of Medical Alley.

“All of this can be traced to Medtronic, which was founded on the business of electricity and implantable devices,” Mandle says. Many Minnesota device companies were founded by Medtronic alums striking out on their own. Mandle adds that busts in the computing tech industry also helped to drive area specialists to the medical device sector.

Today, the Twin Cities boasts some of the top medical device firms in the country. Medtronic — which has operational headquarters in Fridley but is, as of last year, technically based in Ireland — employs roughly 9,000 people at eight facilities in the metro area. Starkey Hearing Technologies employs 1,700 at its Eden Prairie campus, and St. Jude Medical, based in St. Paul, employs around 3,000 people at several facilities. 3M Company, that classic Minnesota corporation, has over 800 people engaged in medical device work in St. Paul.

Medtronic’s facility in Fridley.

Several global medical device companies not based in Minnesota still have sizeable footprints here. Boston Scientific Corporation, based in Marlborough, Massachusetts, is the largest, with at least 5,000 of its 23,000 global employees working out of several Twin Cities facilities.

All that industry concentration makes Minnesota a leader in investment dollars and innovation. Since 2009, state medical technology companies have raised $2 billion in investment money. In 2014, Minnesota firms accounted for fully a third of all pre-market approvals granted by the Food and Drug Administration, a key way to measure how many new products companies are generating.

There’s a network of supporting institutions that both reflects and sustains Minnesota’s strength in the medical device industry. Take Medical Alley, which was created by the founder of Medtronic, and is dedicated to advocacy, lobbying, education, and a whole host of other services to support the industry. There’s the University of Minnesota, too, which has a dedicated Medical Device Center for research and training that staff says is the only center of its kind in the world.

DEED Commissioner Katie Clark Sieben says that the impact of the sector isn’t limited to the Twin Cities metro. Nationally, she says, “we are on the map and we are known, in part because of companies like St. Jude Medical and 3M and Smith’s and Medtronic.”

Those companies, Sieben says, have spurred innovation statewide, including helping to sprout  many other small businesses. Rep. Paulsen says that the vast majority of medical device firms — about 80 percent — have fewer than 50 employees.

While it’s important, the medical device industry in Minnesota isn’t the state’s largest economic engine. It doesn’t compare to the size and scope of the agriculture industry, for example. In 2015, that industry’s sales alone were calculated at $19 billion in Minnesota. The state is a top producer of many agricultural products, like sugar beets, turkey, and sweet corn, and is home to some of the nation’s top agribusiness firms, such as Cargill, Hormel, General Mills, and Land O’Lakes.

But Minnesota’s top single export isn’t turkey — it’s medical devices, and there were $3.6 billion worth of them in 2014. And unlike agriculture, the medical device industry is big in very few places: only 13 states have more than 10,000 workers in the industry.

The industry spends a lot to influence Congress

The cynic might say that the strong, bipartisan Minnesotan opposition to the medical-device tax is born less out of the industry’s economic importance to the state and more out of the political influence that the money has allowed the industry to cultivate.

The medical device sector comprises a small but not insubstantial portion of the vast sum that pharmaceutical and health companies spend lobbying Washington each year. In 2015, that entire industry spent $179 million lobbying members of Congress, according to OpenSecrets.org, which tracks lobbying activity and campaign contributions.

The biggest chunk of that total comes from the pharmaceutical industry, with major corporations like Pfizer, Bayer, and Merck kicking in at least $5 million each. But even among these giants, Medtronic — which has an office in Washington — was a leading contributor, spending about $3.4 million on lobbying. That’s about as much as corporations that most Americans consider to be D.C. power players, like BP and Monsanto, and far more than others, like JPMorgan and Goldman Sachs. Medtronic’s lobbying expenditures dwarf those of other big Minnesota companies: it spent three times as much as General Mills, and a million and a half dollars more than 3M.

Medtronic’s money went toward lobbying on 19 different pieces of legislation in 2015, including the 21st Century Cures Act, a law that medical device firms like because it will speed up the FDA’s approval process for their products. Beyond Medtronic, Boston Scientific spent $1.2 million on lobbying, and St. Jude Medical spent about half a million dollars.

Medtronic was ramping up its lobbying during the George W. Bush administration, but it went into high gear in 2008, as the national health care debate took center stage. While last year’s lobbying totals are lower than at the height of the Obamacare lobbying frenzy, Medtronic is still spending far more now than it did during the Bush administration.

Medtronic lobbying expenditures since 1998
Source: Open Secrets

Beyond direct lobbying on legislation, Medtronic, St. Jude Medical, and Starkey Hearing Technologies have also all been active campaign donors in the past few election cycles:

Total political contributions by medical device companies, affiliated PACs and employees, 2010–14
Source: Open Secrets

Medtronic and St. Jude have spread the wealth evenly between Republicans and Democrats, while Starkey has given almost exclusively to Republicans. Nevertheless, all the recipients of medical device money support getting rid of the tax to some extent. Here’s how much sitting Minnesota members of Congress have raked in since 2010:

Medical device campaign contributions to Minnesota delegation, 2010-2014
Total contributions from Medtronic, St. Jude Medical and Starkey Hearing Technologies. Contributions include those made by employees, affiliated PACs, and the corporations themselves.
Source: Open Secrets

The only member of the Minnesota delegation to receive no contributions from the big players in the medical device industry was Rep. Collin Peterson. Peterson supported a bill repealing the tax last year.

The three companies often cover their bases and give to challengers, too. Mike McFadden, Franken’s 2014 challenger, received over $25,000 — more than Franken. Jim Graves, former Rep. Michele Bachmann’s Democratic challenger in 2012, got several thousand dollars, too.

The 2016 spending cycle is young, but already, Reps. Paulsen, Emmer, McCollum, and Walz have received contributions from Medtronic.

What if the medical-device tax is just bad policy?

The fact that the industry lobbies so hard in Washington, and that many of its champions receive not a few campaign checks, might be all the information some people need to understand why Minnesota’s representatives have fought the medical-device tax. But those representatives themselves might offer a simpler (and more virtuous) explanation for their opposition to the tax: it’s just bad policy.

So why was it included in the Affordable Care Act in the first place? It’s not like the White House or its congressional allies had it out for the medical device industry. Quite the contrary: this particular industry is seen as especially important by some politicians. It’s at the intersection of manufacturing, high tech, research and development — the stuff of stump speeches, a shining exemplar of the kind of business both Republicans and Democrats say needs to thrive in order for America to thrive.

But at the heart of the case for the medical-device tax were two major concerns: making Obamacare affordable and reining in the cost of health care in America.

The medical-device tax was considered a key way to raise revenue to pay for the health care law. The duty of 2.3 percent, to be implemented in 2013, was projected to raise around $29 billion over 10 years. (The levy was initially meant to be double that, but anti-tax lawmakers successfully cut it down.)

In March 2015, the Congressional Budget Office projected Obamacare would cost $1.2 trillion over the course of a decade. That means medical-device tax revenue would, in theory, cover about 2.5 percent of Obamacare’s total costs — a fairly significant contribution from a single tax.

Obamacare’s architects also believed that the law would provide a special benefit for medical device companies: expanding health insurance to millions more Americans, they thought, would expand access to medical devices and drive even greater demand for them.

At the same time, they wanted to find ways to control health care costs, which were ballooning to record levels when Obama took office. Since devices would be taxed at 2.3 percent of their cost, the law’s writers believed the tax would give hospitals — which usually buy devices, not insurers — an incentive to purchase cheaper products.

Immediately after the tax was introduced, medical device industry advocates forecast that it would depress the industry’s growth — in jobs, new patents, and in investor dollars — dealing it a major blow, in the midst of a major recession, exactly when it needed a boost. Today, they maintain they were proven right — but there’s a substantial amount of disagreement as to just how deeply the tax has affected the industry.

In a 2014 Wall Street Journal op-ed, Rep. Paulsen outlined the thrust of industry backers’ claims, arguing that as many as 33,000 workers in the U.S. medical device sector have been laid off as a result of the tax.

In interviews and statements to MinnPost, Paulsen and Klobuchar recalled hearing constantly from business owners that the medical-device tax ended up preventing them from hiring more people and researching new technologies. “What the device tax means to the community,” Paulsen says, “is, you have two fewer projects, a couple less engineers, borrowing from banks to pay off the tax.”

According to Arthur Erdman, director at the U of M’s Medical Device Center, the tax “really hurt at all levels… If you were a venture capitalist and considering putting money into a startup medical device company, those people walked away.” In the startup world, where real return on investment may not occur for years — this is particularly true in the medical tech sector — it hits especially hard.

“Profitability is way downstream” for these kinds of companies, Medical Alley’s Mandle says. “If you start asking companies who are trying to get to profitability or hire one more person, to start paying a tax when they’re $80 to $100 million in debt to have gotten there, it would have a huge impact on entrepreneurship.”

But are any of those doom-and-gloom claims true? For observers in the policy world, and for fact-checkers in the media, tales of major job loss and stifled innovation in the medical device industry don’t add up.

The nonpartisan Factcheck.org examined job-loss claims made by the industry’s boosters in Congress — such as Paulsen’s 33,000 figure — and found that these numbers were exaggerated thanks to overly generous math on the part of the industry’s advocates. (Much existing research comes from AdvaMed, the industry’s official trade group in Washington.) As of October 2013, Factcheck’s analysts found that perhaps 9,000 jobs in the sector — at the very most — have been lost due to the tax.

Beyond that, a Washington Post article fact-checking the claims of Paulsen and others also found holes in their claims. It cited a January 2014 survey in which about nine percent of U.S. medical device firm managers said they did not have to lay anyone off because the tax; fully half of the respondents said they didn’t change how they did business at all as a result of the tax.

Some experts have suggested, or claimed outright, that the industry has exaggerated the effects of the tax. The left-leaning Center for Budget and Policy Priorities issued a paper in February 2015 that sought to debunk anti-tax arguments and defended it as an important revenue stream for Obamacare.

The tax, for example, hasn’t prompted companies to move employment offshore, as some device tax opponents have claimed, according to the paper. Even the companies themselves say that offshoring has not happened as a result of the tax. Covidien, the Irish company acquired by Medtronic in 2015 so it could move its base there, said in 2012 that the tax has never prompted them to move jobs out of the U.S. or eliminate them. However, Boston Scientific, which has a substantial Minnesota presence, said in 2013 it would lay off 1,000 employees, in part because of the tax.

And, the CBPP paper notes, the tax makes the ACA less of a drain on the federal deficit. That concern has led Democrats to support repealing the tax while insisting lawmakers account for that $29 billion in lost revenue somewhere else.

What about device backers’ claims that the tax has scared away investors? Recent numbers show that, on the whole, Minnesota firms are doing just fine. According to Medical Alley, 2015 was a record year for investing: Minnesota firms raked in a total of $434 million in investment dollars, a seven-year high.

With all of those points in mind, it’s difficult to paint a comprehensive, accurate picture of how the medical device industry has fared in the Obamacare era, but the Government Accountability Office — which provides auditing and investigative resources for Congress — attempted to. In June 2015, it released a report that revealed mixed outcomes for the industry in the last five years.

The GAO studied 102 medical device firms, from large companies (including Medtronic and St. Jude) to mid-sized and small firms. Overall, the audit found that from 2005 to 2014, medical device companies’ profits increased by 43 percent, even through the difficult recession years.

That prosperity wasn’t spread evenly, however: the 30 biggest companies accounted for 95 percent of net sales annually, and the smallest 37 accounted for one percent of that total.

The GAO found, too, that smaller firms’ sales gains remained stagnant while medium- and large-sized gains rose. Medtronic, for example, pulled in $13.9 billion in profits during the last fiscal year, a three-year high.

While the GAO’s findings were mixed, the firms surveyed remained cautious about the future. Three-quarters of the companies said they were not certain about the health care law’s full impact on their businesses; more than half of the firms believed the medical-device tax had, or may have, a negative impact.

Toward full repeal

Whatever the tax’s merits, medical device industry advocates and their allies in Congress — including Minnesota’s entire congressional delegation — have made it clear they won’t rest until they achieve its full repeal. December’s two-year suspension was a victory, to be sure, but it was not the final objective.

It took considerable time and effort even to get to this point. Paulsen says that he spent years trying to make the issue more personal for his colleagues. “I’d seek out members, Democrat and Republican, on the House floor, explained why I was doing it, if there was a connection to a company in their district that I knew about, I would reference that and make a point of it,” he says.

Congress, of course, does nothing fast — much less a major change to a huge law. The fact that Paulsen, Klobuchar, and Franken would push for the repeal of the tax became a given in every session of Congress since Obamacare became law. On several occasions — most recently, last summer — bills to repeal it received strong majority votes in the House, only to stall in the Senate. (However, in 2013, the Senate passed an amendment to repeal the tax on a nonbinding budget resolution.)

It’s not that the medical-device tax doesn’t have plenty of opponents in the upper chamber, but there, much more Democratic support is needed to move legislation. And other Democrats who want to repeal the tax — like Massachusetts Sen. Elizabeth Warren and New York Sen. Chuck Schumer — believe, along with Klobuchar, Franken, and others, that voting for a repeal is conditional on making up the revenue that would have been raised by the tax from another source.

Beyond that, plenty of Senate Democrats are in favor of keeping the tax. Twelve of them voted against the 2013 amendment — including, notably, then-Majority Leader Harry Reid of Nevada. Reid, who is now Minority Leader, has called the idea of repealing the tax “stupid.”

Ultimately, tax opponents like Paulsen and Klobuchar were hoping for something like the big, year-end tax deal — a must-pass bill that they could staple a repeal or suspension to, allowing it to proceed to the president’s desk with minimal drama.

Paulsen, who called the passage of the suspension a “surprise relief,” says it gives Congress time to figure out how to make the temporary policy into permanent law — perhaps, he says, as part of a broader tax reform package that he and other lawmakers very much want.

Klobuchar called the suspension a “great step,” and said it provides needed relief to the industry while giving Congress time to work on a long-term solution with an offset. She pointed out that the CBO’s projection on Obamacare’s long-term costs found that the health law will cost $176 billion less than predicted, but that the extra money can’t be used to make up for the medical-device tax. The fact that, as of 2014, the tax was only raising about three-quarters of the revenue initially forecast — leading to a 10-year projection of $24 billion — might factor into these calculations, too.

“That’s why a more extensive discussion needs to take place to either find a pay-for or to repeal the tax while accounting for the fact that the [ACA] has ended up costing less than originally predicted,” Klobuchar said. “This is a tax on manufacturing, innovation, and research at a time when we need manufacturing to be strong.”

The medical-device tax, loathed as it may be by some, is just one of many factors that affects this complicated business. And with few exceptions, most metrics indicate that business for this industry is far from bad.

But a tax is a tax, and this one hasn’t been finished off just yet. The same kind of methodical effort that led to the passage of the suspension will be needed to secure a permanent repeal. Minor policy quibbles aside, Minnesota’s lawmakers are determined to make it happen.

Correction: this article has been corrected to accurately reflect the number of people employed in Minnesota by several medical device firms.

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Comments (23)

  1. Submitted by John Clouse on 01/26/2016 - 11:45 am.

    Medical Devices Tax

    This proves that lawmakers don’t represent the voters of MN but rather big business. They all can be bought.

    • Submitted by Ron Gotzman on 01/26/2016 - 12:16 pm.

      I am a MN voter….

      The vote to suspend and ultimately do away with this tax represents my view as a voter in MN. Thank you for representing my view in the ultimate repeal of this tax.

  2. Submitted by Frank Phelan on 01/26/2016 - 12:24 pm.

    Would That

    Our representatives devoted so much time and energy to preserving & expanding the shrinking the middle class. This is why Sen. Warren tells us that the system is rigged against us, and why cynicism is as common as it is.

    • Submitted by Pamela Pommer on 02/24/2016 - 03:03 pm.

      Device Tax

      YES, I care and that even the US companies are crying about this small tax, let alone a foreign entity like Medtronic!! Disgusting!

  3. Submitted by John Deitering on 01/26/2016 - 12:30 pm.

    Medtronic

    Does anybody at all care that Medtronic is actually now a foreign entity now that they have moved offshore to avoid taxes? Why should the medical device industry be the only industry to get a pass on solving American health care issues? Our Minnesota reps (both senate and house of reps) are just revealing what they are willing to do for money.

  4. Submitted by Dennis Litfin on 01/26/2016 - 12:36 pm.

    Very thorough article Sam…

    Thank you.

  5. Submitted by Wayne Van Cleve on 01/26/2016 - 12:52 pm.

    Medical Devices

    Here’s a novel idea… compromise. How about a partial reduction of the tax? As the article explains, the claims of the device makers and the Legislative proponents of the repeal use claims about the tax that aren’t quite correct. As a MN Voter, it seems that the push to repeal the tax represents the results of campaign donations and not the needs of our state’s voters.
    Perhaps all the legislators could focus some of their zeal on SOME control of the pharmaceutical industry, as they seem to be largely able to do as they please. Real reduction of medical costs in the US should come from regulation of the insane costs of pharmaceuticals.

  6. Submitted by Pat Backen on 01/26/2016 - 12:55 pm.

    No Sense

    The medical device communities argument against this tax, and subsequently our Washington representatives argument, has never made sense to me.

    As mentioned in the article, the tax is typically paid by hospitals and other end users of the product. That cost is passed on to insurance companies and patients. Every device maker is subject to this tax, so how can one be hurt more than another (or hurt at all)?

    Perhaps the tax is paid by device makers when purchasing components for their products, in which case that cost is likely passed along to their customer, be it another manufacturer or an end user.

    In return this tax helps brings more patients to insurance rolls, providing more potential customers for the device makers.

    I am no economist, but from a layman’s point of view this tax appears to be an investment in future customers and sales.

    Perhaps I am missing something but it just feels like this is a reflexive argument against taxes just because companies think all taxes are bad, and they don’t want to set a precedent.

  7. Submitted by Greg Kapphahn on 01/26/2016 - 01:04 pm.

    Until We Change the Campaign Finance System

    in the US,…

    we will never alter these kinds of outcomes,…

    but even with that in mind,…

    we must blame the corporations who believe they are not responsible in any way,…

    for helping to pay for the legal system which protects their patents,…

    nor helping to pay for any of the infrastructures upon which they and their employees depend,…

    at least as much as the politicians they influence with their campaign contributions,…

    and their implied threats that an opponent could be found and massively supported,…

    if those currently holding office don’t do things their way.

    If “corporations are people,” today’s corporations,…

    together with their executives and their corporate boards,…

    are some of the WORST,…

    most selfish, most self-serving, citizens on the face of the planet.

    It seems as if each and every one of them hungers to gain the power,…

    to become the kind of state and nation leader, that Anastosio Samosa was in Nicaragua in 1972,…

    when Menagua was destroyed by an earthquake,…

    and Somosa pocketed all the international aid money sent to help rebuild the city,…

    (the old neighborhoods of which are STILL in ruins).

    During it’s recent corporate “Inversion,”…

    (perversion?)…

    to Ireland, even Bill George,…

    the formerly-admirable leader and founder of Medtronic,…

    went over to the dark side.

    In the end, even the most admirable and honest politician,…

    is currently in the position of having to bow to companies such as these from time to time,…

    or the corporations will replace them down,…

    likely with someone even more compliant.

  8. Submitted by Jim Million on 01/26/2016 - 01:24 pm.

    Let’s stay on point here…

    The medical device tax does not and never did make any sense, other than to find one more little bit of revenue to offset something worrisome in ACA budgeting.

    Raising the prices of important medical devices that are used very much for the health maintenance and longevity of Medicare and VA patients makes no sense in overall Federal dollar swapping. This tax does just that, among other things.

    It was undoubtedly just a little bit of revenue gathering to in some way make ACA a cost reduction program. Well, this part was senseless, if not clearly cynical.

    In one breath government health plan advocates attack the great expense of new medical technology, while also grabbing their piece of that expense, thereby increasing it.

    Makes no sense. Never did.

    • Submitted by Greg Kapphahn on 01/26/2016 - 05:08 pm.

      Somehow, You Completely Failed to Make

      a case for HOW and WHY this tax doesn’t make sense.

      • Submitted by Jim Million on 01/27/2016 - 12:07 am.

        Please Read Again

        The tax pushes up the price, as noted. Med Equip prices are already a complaint of taxing advocates.
        Higher pricing comes back to specific public health plan budgets, as noted. These are not simple transfer payments.

        e.g. It makes no sense.

  9. Submitted by Ray Schoch on 01/26/2016 - 01:32 pm.

    The appropriate term

    …to explain this united opposition to the tax on the part of the entire Minnesota delegation is either “pandering” or “bribery.” Take your pick. For Republicans, of course, there’s no such thing as a good tax, and they’re heartily supported in that belief by Chambers of Commerce throughout the state and nation. Yep, a tax-free society is what these people want – but one where all the streets are still paved, the lights work, and patients who need medical care that includes medical devices can still get both the care and the devices.

    It’s a nice example of cognitive dissonance.

    That Minnesota’s DFL’ers have joined in the chorus is especially shameful, since the whole point of the tax is to bring in revenue to help pay for the expansion of health care to populations of people who are underserved. That Minnesota officials would go out of their way to support the interests of a company that unabashedly *left the country to avoid paying taxes* (this is called greed, folks) should have sensible Minnesotans shaking their heads in disbelief. Eliminating a tax such as this one might make a certain kind of sense if the goal were to protect a fledgling industry – it’s far removed from “free market” capitalism, but at least a plausible rationale can be devised for it. That’s not the case here, however, since MedTronic, the big dog in the field, is profitable enough that it could afford to eat a foreign company just so it could – perfectly legally, if not ethically – move the headquarters offshore, thus padding the bottom lines of executives and shareholders alike.

    “Money is the mother’s milk of politics,” according to the late Tip O’Neil, and this is as good an example of bribery as public policy as we’re likely to find in this election year. I’d guess those legislators willing to pander to the interests of a large and profitable sector of the economy expect to be rewarded in some fashion, and it will come as no surprise if that cynical expectation is met.

    • Submitted by Bob Petersen on 01/28/2016 - 10:34 am.

      …is Pure Pandering

      When the ACA first came out, the proposals were for a tax much higher than the 2.3% than it is now. The Democrats, including those in MN, put their heads in the sand because they just wanted the ACA to go through. The vast expanse of how the ACA puts much at risk in areas beyond MN did not matter to them. Their only goal was to pass something so that they can continue to get votes. Their only care was doing something that feels good.

      Republicans are against any taxes because taxes have always been presented as temporary to pay or fix something. They have never permanently decreased. The government, both the state level and the federal, receive records amount of revenue every passing year. If you listen to the Republicans beyond just that they don’t want more taxes is that when is taxation enough. They may not be perfect, but they are not going to go it alone and more than quadruple the deficit as what was done the first years Obama was in office (Congress was Dem controlled) and now our debt is at unconscionable levels for future generations to take care of. All in the name of doing things that feel good, be damned the consequences.

  10. Submitted by Connie Sullivan on 01/26/2016 - 04:52 pm.

    Thanks for this, the fullest discussion of the medical device tax and ACA, and the efforts to repeal it, that I’ve seen in the popular press. There is no sense to a repeal, and even this steady-hand analysis of what’s going on doesn’t persuade that a repeal is reasonable or necessary in any way.

    First, the medical device tax has two purposes: to help fund the ACA, and to provide a mechanism by which to limit prices–and price increases–on medical devices by pushing end users, who pay the tax, to resist high prices on devices.

    There’s the kicker: this tax limits the device makers’ ability to freely manipulate, and especially increase, prices. The tax will have a negative effect on profit-making, restricting corporate greed. It’s a long game, for companies who can and do routinely pass through this little tax on medical devices. Hospitals and insurers pay the prices, and the tax gives them incentives to push back against Medtronic and St. Jude and Boston Sci, et al.

    I am appalled at the two Minnesota senators, Klobuchar and Franken, for their determination to provide more profits for companies like Medtronic that simply hate any and all taxes. They have moved to Ireland to avoid U.S. taxes, while their executive continue to live in the U.S. and enjoy the freedoms and rights we have, plus the rule of law.

    It’s a pass-through tax that has absolutely no impact on a corporation’s cost of production (or R and D). So we are, indeed, talking ONLY about campaign contributions as a reason for Klobuchar and Franken to jeopardize Obamacare with this effort to eliminate the medical device tax.

  11. Submitted by Ellen Hoerle on 01/26/2016 - 05:16 pm.

    The willingness to lie and believe the lies is what gets me

    I wrote a commentary last year that was published in the Eden Prairie News and on my blog:

    http://www.yesiampayingattention.com/2015/03/06/lobbyists-with-lots-of-money-drive-paulsens-agenda-not-you-or-me-his-constituents/

    It was in response to Erik Paulsen’s commentary in the same paper insisting that the medical device tax had cost 33,000 jobs and “threatened 165,000 more.” He was willing to disseminate a statistic that he could never prove was due entirely to the tax and not the result of other market forces like say competition or defective product or any of the myriad other possibilities.

    I have been a constituent of Erik Paulsen’s ever since I moved to Eden Prairie nearly 14 years ago and I have never considered him to represent my interests or be interested in listening to what I have to say. To say I feel disempowered is an understatement.

    I get requests from Amy Klobuchar for donations occasionally. She will never get one penny of donations from me ever again. (I can’t remember if I donated to her in the past or not.) But why should she care what I think when she has big corporate donors to thank?

  12. Submitted by Tom Anderson on 01/26/2016 - 09:26 pm.

    I agree, a nice and complete article

    I did always wonder about the “why” of the device tax. It makes no sense to tax the devices that improve quality of life or even extend it. Just like taxing the doctors didn’t make sense (until the government backed off). At least “sin taxes” made sense in that while discouraging behavior that decreased health, funds were gained to help pay for those with the poor health. Now, the government taxes the very companies and people that are trying to improve healthcare to pay for the care of people in poor health. The more you try to help, the more you are punished financially.

    • Submitted by Connie Sullivan on 01/27/2016 - 03:31 pm.

      To repeat: We re talking here about a pass-through tax that has NO impact on the bottom line of any medical device company, nor does it have an impact on their employee numbers in Minnesota. Did you read this article?

      What the tax does is empower patients and hospitals and health insurers to push back against those who would rather set prices in a void of any constrictions.

      • Submitted by Tom Anderson on 01/27/2016 - 07:24 pm.

        The IRS says

        From the IRS website:
        Q3. How much is the tax?
        A3. The tax is 2.3 percent of the sale price of the taxable medical device. See Chapter 5 of IRS Publication 510, Excise Taxes, and Notice 2012-77 for additional information on the determination of sale price.

        Q4. Who is responsible for reporting and paying the medical device excise tax?
        A4. Generally, the manufacturer or importer of a taxable medical device is responsible for filing Form 720, Quarterly Federal Excise Tax Return, and paying the tax to the IRS.

        Q5. Will individual consumers be subject to any reporting or recordkeeping requirements?
        A5. Generally, no action is required by individual consumers. Because the tax is imposed upon the sale of a taxable medical device by the manufacturer or importer, the manufacturer or importer is responsible for reporting and paying the tax.

        The IRS seems to think that you are wrong.

        • Submitted by Connie Sullivan on 01/31/2016 - 02:29 pm.

          This device tax works just like any other sales tax: the person or entity who pays it is the consumer–the end user who buys it–but the seller is the one responsible for receiving, reporting and paying or remitting the tax that was paid by the consumer or end user to the corporation seller at the point of sale.

          In other words, none of these device manufacturers is paying this tax. You and I are. I know, sometimes it’s hard to understand the IRS language. But most of us can see this for what it is: a pass-through tax like the sales tax.

          • Submitted by Tom Anderson on 02/01/2016 - 06:49 pm.

            Thankfully

            It doesn’t cost these businesses anything to receive, report, and then pay the taxes that they’ve collected throughout the year. They certainly wouldn’t need whole departments who are paid to do nothing but receive, report, and pay.
            It is also a good thing that the tax is on sales, not profits, so that all this “pass thru” money doesn’t hurt the bottom line at all, since it doesn’t cost anything to receive, report, and pay.

  13. Submitted by joe smith on 01/27/2016 - 09:58 am.

    As the old adage goes when a person says “I am from the Government and I’m here to help” grab your wallet. This tax gets pushed on to the consumer and it does cost jobs. Medtronic leaving Minnesota and becoming a foreign company costs Minnesota millions in tax revenues. Big companies being taxed out of a state is a start of a major problem, just look at New York, New Jersey and California. The device tax is just another case where through taxation Government tries to cure a problem they started in the first place with a bad policy (Obamacare).

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