A recent Politic365 opinion piece suggested that the FDA may classify smartphone apps as medical devices, which would subject them to a 2.3-percent medical device tax mandated by the Affordable Care Act.
A few days ago, the FDA released a statement saying it would not tax smartphone health apps as medical devices. But the argument is just a snippet of the heated debate over the unpopular medical device tax.
Last week, the U.S. House of Representatives passed a repeal of the tax as an amendment to its 2014 budget proposal. Many senators, including liberal-leaning senators like Democrat Al Franken of Minnesota, say the tax could hurt startups and smaller businesses.
The Affordable Care Act, which passed in 2009, relies on the medical device tax to raise $30 billion in revenue. Franken argues that Congress can find another way to raise the money.
The Politic365 piece argues that a tax on apps could restrict access to millions of Americans. Since a 2.3-percent tax on a 99-cent app comes to two cents, that scenario seems unlikely.
However, a 2.3-percent tax on a $60,000 device equals $1,380, which is significant enough to potentially motivate businesses to pass costs onto consumers.
The Center on Budget and Policy Priorities (CBPP) argues that the healthcare industry will expand rapidly thanks to the healthcare bill. As a result of its expansion, a 2.3-percent device tax is unlikely to hurt growth.
Opponents argue that higher taxes will shift production offshore, but the tax applies equally to domestically produced and imported goods. Goods produced for export are actually exempt from the tax.
As to whether the tax will stifle hiring, Martin Rothenburg, head of a New York medical device manufacturing company, says “no.”
“If our new device proves effective and we market it effectively, this small increase in cost will have zero effect on sales,” Rosenburg wrote in the Syracuse Post-Standard. “It would surely not lead us to lay off employees or shift to overseas production.”
Edited by
Braden Becker
