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Vote May be Coming for Medical Device Tax


Tax Repeal Heads to House Floor

In the frenzy to halt the approaching medical device tax teed up to hit the House floor—that being Minnesota Republican Erik Paulsen’s heavily co-sponsored Protect Medical Innovation Act of 2011—pro-repeal pundits and politicians have been weighing in and pulling few punches.

“To the extent they can, device makers will pass this tax on to the hospitals and provider purchasing groups that buy their products, which will ultimately show up in insurance premiums. Or, they’ll offset the costs with layoffs or by slashing research and development. Less innovation, fewer jobs, higher health costs—the usual ObamaCare trifecta,” opined the editors of the Wall Street Journal in a May 29 editorial provocatively headlined “Improvised Explosive Device Tax.”

Calling the looming 2.3 percent levy one of the Patient Protection and Affordable Care Act’s “worst tax increases,” the piece pointed out that the advance fallout “has already touched off a wild lobbying rumpus. Many providers, including all the major hospital trade groups, are asking the IRS to prohibit the device makers from ‘passing the tax to their customers, including some hospitals’ by certifying on their tax statement that they haven’t. They want civil and even criminal penalties for false claims, though how this could be proven is anyone’s guess. Perhaps the Bureau of Alcohol, Tobacco and Firearms—which does most excise-tax enforcement against bootleg smokes and rum running—should be dispatched to the device-company hubs of Boston and Minneapolis.”

Politico.com noted that 10 Democrats have joined the 228 Republican co-sponsors of Paulsen’s bill. “Democrats have always been divided about whether the tax—crafted to help pay for the law—was a good idea, with strong resistance from lawmakers in states with a population of device makers,” the site reported May 30. “Proponents of the tax said it is necessary to raise money to help pay for the health law. But as many of those Democrats face voters, and the January 2013 implementation date draws near, they’re getting lots of questions about it.”

The news piece highlighted the fact that the Senate is torn over the tax along partisan lines too. “Elizabeth Warren, the Democrat trying to unseat Republican Sen. Scott Brown in Massachusetts, has said she would support repealing the tax,” reported Politico, “making her perhaps the most liberal Democrat to speak out against it.”

For his part, Brown has joined with Orrin Hatch of Utah and several other GOP senators in backing an amendment that would repeal the tax. “The new 2.3 percent tax on medical device sales that was imposed in the federal healthcare law will cost our economy thousands of jobs and limit Americans’ access to the most groundbreaking, state-of-the-art medical devices,” said Brown in a May 22 Senate speech.

Earlier in May, Washington Post columnist George Will wrote that the 2.3 percent tax “will be piled on top of the 35 percent federal corporate tax, and state and local taxes. The 2.3 percent tax will be a $20 billion blow to an industry that employs more than 400,000, and $20 billion is almost double the industry’s annual investment in research and development.”

By comparison, support for the tax has been relatively muted, with the most vociferous cheers coming from group purchasing organization Premier—and in the form of Democrats’ light support of Paulsen's bill in the House and quiet but total non-support of repeal measures in the Senate.