Local manufacturers seek repeal of new tax
Date: 4/6/2010
April 7, 2010.By G. Michael Dobbs
Managing Editor
CHICOPEE -- Local medical device manufacturers gave Sen. Scott Brown a grim message on March 30. They believe a 2.5 percent federal tax will hurt their businesses to the point of cutting into necessary research and development funds and perhaps cause job losses.
Marton Farady, a project manager at Dielectrics in Chicopee, demonstrates a product made at the company, a vest designed to aid in the treatment of cystic fibrosis, to Sen. Scott Brown last week. Brown met with local medical device manufacturers to hear their appeal for his help in repealing a new tax on medical devices.
Brown pledged to work on repealing that part of the recently passed healthcare reform legislation. He said President Barack Obama should stop telling "folksy stories" about healthcare reform and "look at jobs."
"This will affect jobs in my state," Brown emphasized.
Brown met with representatives of the seven medical device companies in Western Massachusetts on March 31 at Dielectrics in Chicopee. According to Adam Epstein, the company's vice president of research and development, the firm specializes in fabricating thermo plastic components for other medical device companies as well as manufacturing complete items for other companies.
The tax would be used to help pay for the provision of the healthcare legislation, but there is confusion about whether the tax will be on the finished medical devices or if companies such as Dielectrics that make components for others will be taxed as well, according to Steven Richter, the president of Microtest in Agawam and the spokesperson for the companies.
When contacted later that same day, Congressman Richard Neal said that industry representatives were at the bargaining table when the tax was established in the legislation and Neal was personally involved in reducing the tax from 5 percent to 2.5 percent.
Neal said he would be interested in supporting a repeal of the tax if another revenue stream could be identified to replace it. He added he would investigate whether or not the manufacturers of components would be subject to the tax.
Richter said the life science industry in Massachusetts is growing and experienced a 7 percent increase this year over last. Locally the seven companies employ about 500 people "in great paying jobs," he said.
"[The industry] is growing," he added. "We see it actually moving forward."
What concerns Richter and the others is the Food and Drug Administration will simply produce a list of every company in the medical device field and tax "all the folks downstream."
The tax could cut substantially into the budget of the companies, slowing down the research of new products or causing layoffs, Richter said. In his case, he has put expansion plans for his company on hold until he learns how this new tax will affect him.
Brown said the tax would eliminate all profits for one medical device company in Chelmsford, for example.
