Despite its unpopularity, both the White House and Senate Majority Leader Harry Reid (D-Nev.) vowed this week they would not let Republicans make the tax a bargaining chip in averting a government shutdown on Tuesday. Republicans nonetheless put that chip on the table Saturday, along with a new demand to delay for a year making people buy medical insurance under President Barack Obama’s health care law. The requirement goes into effect Jan. 1.
Reid, through a spokesman, called the idea of repealing the medical device tax as part of an anti-shutdown bill “stupid.” “The Senate will reject any (funding bill) that includes a repeal of the medical device tax,” said Reid spokesman Adam Jentleson.
“Absolutely not,” White House spokesman Jay Carney answered when asked if President Barack Obama would support repealing the tax.
The 2.3 percent tax, which took effect in January, is aimed at U.S. sales of medical devices used chiefly by doctors and hospitals, such as pacemakers and CT scan machines. Consumer items are exempted, including eyeglasses, contact lenses and hearing aids.
The tax was adopted as part of and intended to help pay for Obama’s Affordable Care Act. Repealing it would cost the government an estimated $29 billion over the coming decade.
U.S. medical device companies employ about 400,000 people and boast sales of $130 billion annually. AdvaMed, the industry’s largest trade group, says the tax is hurting job creation, reducing investment in medical innovation and increasing health care costs.
“The U.S. leads the world in medical technology, but the device tax threatens that leadership because it will put an additional burden on medical device innovators already struggling under the weight of America’s uncompetitive tax system,” the group says on its website. “The tax will be levied on medical device sales in the U.S. regardless of whether the company is making a profit.”
Democrats counter that the new health care law will increase revenue for the industry by expanding health coverage to millions more people, helping offset the impact of the tax.
Democrats and Republicans in both the House and Senate have supported repealing the tax. Last year, 37 House Democrats voted with all 233 Republicans to repeal the tax. The bill passed the House, 270-146, but died in the Senate.
Many of the Democrats who favored the bill came from states like Minnesota, New York and California, which have a heavy presence of medical equipment makers.
In March, the Democratic-led Senate voted 79-20 to repeal the tax, but that measure was part of a nonbinding budget resolution. The vote, however, showed bipartisan support among senators for repealing the tax.
“It’s got such strong support in both the House and Senate,” said Rep. Kevin Brady, R-Texas, a senior member of the tax-writing House Ways and Means Committee. “It’s a tax that makes no sense. In the weakest economic recovery since World War II, the president needs to be thinking about how you keep American jobs, not either kill them or send them overseas.”