Minnesota House committee approves bill providing tax credit to medical device companies

Friday, February 13, 2015

A bill providing a tax credit to medical device companies aimed at offsetting the federal medical device tax won approval Wednesday from a House panel.

The bill's author, Preston Republican Rep. Greg Davids, said the federal tax is "tremendously unfair" and his legislation seeks to provide the state's medical device tax companies with some relief. The tax took effect in 2013 and was approved as part of the Affordable Care Act.

"This is an ill-conceived tax for an ill-conceived program that has failed," Davids said.

The House Health and Human Services Reform Policy Committee approved the bill on a voice vote, sending it on to the House Taxes Committee, which Davids chairs. Rochester GOP Sen. Dave Senjem is sponsoring the bill in the Senate.

But even Davids acknowledged that getting the measure passed this year will be tough — largely because of its cost. While an official cost estimate for the bill is not yet available, Davids said he expects it to be high, given that 25 percent of the $30 billion expected to be raised by the tax over the next 10 years comes from Minnesota companies.

Davids said there is the option of scaling back the size of the tax credit to make it more affordable.

During the hearing, a representative from LifeScience Alley, a regional trade association that represents science and health technology companies, testified in support of the bill. The group's lobbyist Genevieve Plumadore told lawmakers that the state's medical device industry employs more than 35,000 people. She said she has heard from local companies that the federal tax has caused them to hold off on hiring new employees and limit research spending.

"This money that is directly leaving the state could have been reinvested in research and development and new hires from our growing companies," Plumadore said.

Minnesota GOP Rep. Erik Paulson is also sponsoring a bill to repeal the medical device tax in the U.S. House. Plumadore said she hopes the Minnesota bill will encourage members of the Minnesota congressional delegation to fight for the repeal.

Some on the committee questioned whether it is good tax policy for the state of Minnesota to pay medical device companies to offset for a federal tax.

"I don't support this. I don't think that Minnesota should be making up for taxes imposed by the federal government," said Rep. Tina Liebling, DFL-Rochester.

She added that, given how well the medical device industry is doing, "I'm not going to cry any tears over this extra (tax) money."

 

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