Momentum for Medical Device Tax Repeal

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Although the U.S. Supreme Court’s recent decision supporting the Affordable Care Act has made many people happy, there are still some who are working to repeal at least part of it. The Wall Street Journal reported that efforts to repeal the 2.3 percent medical device tax are continuing to gain momentum.

In April, the U.S. Senate Committee on Finance held a hearing in which the chairman of the subcommittee on healthcare, Rep. Patrick J. Toomey (R-PA), explained the tax is poorly designed. He said that it is a tax on sales instead of a tax on profits. The companies that spent large amounts of money making the products and bringing them to market were losing money even when they started to have sales. Imposing a tax on these sales prior to there being a profit increases the debt load that the companies have to carry, and there is only so much debt that can be financed.

In June, the House of Representatives passed a repeal of the medical device tax by a margin of 280-140 which sends the bill to the Senate. The repeal is likely to encounter a filibuster in the Senate unless 60 senators come out in favor of bringing the bill to the floor for debate.

The tax is supposed to bring in approximately $30 billion in the next 10 years. Manufacturers have opposed the tax, because they state they could produce and sell devices at much cheaper prices without the tax. Preliminary data shows that the tax has not performed well as a fundraiser for the Affordable Care Act. It raised $913 million in the first half of 2013 which was approximately 75 percent of what was anticipated. Up to 15,000 tax filers were expected, but only 5,107 medical device tax forms were actually filed.

President Obama is expected to veto any sort of repeal, because the tax funds the Affordable Care Act. An actual repeal of the tax would require another source of revenue to replace money from the tax. So, don’t be surprised if the repeal of the tax becomes a bargaining chip in the process of approving spending bills later this year.

For more information, see The Wall Street Journal.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: DSC_3892, Flickr)

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