By Jonathan Larsen, TYT Politics
The Problem Solvers Caucus, a new, bipartisan congressional group attempting to repeal Obamacare’s tax on medical devices, has received almost twice as much money from the medical-device industry as other members have, according to an analysis of House campaign donations done for TYT.
The 40 or so House members who formed the Problem Solvers Caucus earlier this year include a roughly equal number of Democrats and Republicans. On July 31, they unveiled a health-care reform plan including permanent repeal of a 2.3% tax on medical devices that was temporarily suspended under Obama but is set to resume on Jan. 1.
At TYT’s request, the non-profit campaign-finance group MapLight analyzed political donations from medical-device companies, industry organizations, and individual employees. MapLight found that members of the Problem Solvers Caucus on average received $10,051 during the campaign cycle for the 2016 elections, as opposed to non-members of the caucus, who averaged $5749. The numbers do not include members first elected in 2016, for whom complete data is not yet available.
Caucus co-chair Rep. Josh Gottheimer (D-NJ) took office this year, so donations to his campaign are not included. Co-chair Rep. Tom Reed (R-NY) received a total of $25,650 from the industry during the 2016 cycle. Press representatives for Gottheimer and Reed did not respond to emails requesting comment.
Collectively, the industry—including several trade groups—reportedly have spent tens of millions of dollars lobbying Congress to end the tax, which was estimated to raise about $29 billion in the first ten years after its enactment at the start of 2013. Leaders of the trade groups have also written op-eds ascribing various economic benefits to permanent repeal.
The Problem Solvers Caucus—along with other members of both parties—have joined the medical-device industry as describing the tax as a drag on innovation and job creation. As TYT has previously reported, however, independent analysts have seen few signs of significant negative impacts from the tax.
In the same report, TYT found that leading medical-device companies appear poised to use their capital on hand—including tax windfalls from the suspension and possible repeal—for purposes having nothing to do with job creation, such as buying back company stock and paying dividends to shareholders. Other companies are on the record planning to pursue measures that often threaten jobs, such as mergers and acquisitions, automation, and offshoring manufacturing.
Industry observers have not reported a single medical device maker of significant size planning widespread hiring if the tax is repealed.
In cases where congressional opponents of the tax cite specific companies that would benefit from repeal, the numbers—and the company’s own federal financial statements—often tell a different story.
Problem Solvers member Rep. Fred Upton (R-MI), for instance, represents a district that’s home to Stryker Corporation, a $10 billion maker of medical devices. Stryker CEO Kevin Lobo has appeared on national television calling the tax a killer of jobs and innovation, but a previous TYT report found that Stryker’s own financial documents and public statements suggest the company enjoyed considerable growth and financial success while the tax was in place. After the tax was suspended, Stryker announced it would expand one Michigan facility, and laid off 50 workers in the process.
Democrats other than Problem Solvers members are pushing for repeal, as well. It’s one of the few policy items Senate Minority Leader Chuck Schumer (D-NY) agrees on with Majority Leader Mitch McConnell (R-KY).
On Jan. 7, 2016, Schumer touted the tax suspension’s beneficial impact on AngioDynamics, a medical-device maker headquartered in upstate New York.
The company’s annual report from May of that year, however, lists 1300 employees, unchanged from the two preceding years. The company did have some turnover during that period, as AngioDynamics acquired other companies and laid off people as a result, creating a net loss of jobs for the industry.
Offsetting those layoffs, AngioDynamics reportedly did hire 76 people in 2016. But that was attributed not to suspension of the tax but to a rival’s product recall.
Schumer has cited at least one other company as creating jobs due to the tax suspension. In September 2016, appearing alongside future Problem Solvers member Rep. John Katko (D-NY) at New York medical-device maker Welch Allyn, Schumer said that suspending the tax “played a pivotal role” in the company’s creation of 100 new jobs.
The announcement came one year after the company’s new owner, Hill-Rom, laid off 100 workers as part of its acquisition of Welch Allyn. Five months after Schumer’s announcement, Hill-Rom’s annual report revealed it paid out $14 million in severance and benefits to laid-off Welch Allyn employees in 2016, and said, “We plan to make additional acquisitions in the future.”
As to the role the tax suspension played in Welch Allyn’s 2016 hiring of 100 people, the company itself does not appear to have made that connection at the time. The company received as much as $13.5 million in government grants and tax credits for its expansion, and some of the new hires there were possibly going to be transfers from other sections of the company.
In addition, in its 2015 report, before the tax was suspended, the company said it didn’t need more cash.
“We believe,” the report says, “that cash on hand and generated from operations, along with amounts available under our credit facility, will be sufficient to fund operations, working capital needs, capital expenditure requirements and financing obligations.”
Schumer’s office did not respond to a request for comment.