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House votes to repeal device tax, but what's the point?

House Republicans have voted more than 50 times to change the Affordable Care Act (aka Obamacare) to no avail. They took another stab at one part of the law last week, when the House of Representatives voted 253 to 163 to approve the "Jobs for America Act," which included a measure that would roll back the 2.3% excise tax and refund companies that have already made a payment.

Industry associations the Medical Imaging & Technology Alliance, Advanced Medical Technology Association (AdvaMed), and Medical Device Manufacturers Association immediately voiced their support. Echoing the sentiments of his colleagues, AdvaMed CEO and President Stephen J. Ubl said in a news release, "Repealing this tax will help ensure the U.S. maintains its global leadership in this high-tech manufacturing sector and advance the development of new cures and treatments."

While opposition to the tax is widespread across the industry, even those who grudgingly accept the tax burden take issue with the fact that it is levied on sales, not profits. "That's a hefty blow to 80% of the industry comprised of smaller startup companies, which may be years away from posting profits," writes Sally Pipes on forbes.com. These companies typically spearhead medtech innovation.

Proponents of the tax, which helps to fund Obamacare, have been ill-served by the Internal Revenue Service, which has been ham-fisted in enforcement of the law. The IRS conceded that it is having difficulty figuring out who does and does not owe the tax, and it has wrongfully issued more than $700,000 in penalties, according to forbes.com. And its revenue projections are way off: The IRS recorded a 24% shortfall in the first six months of 2013, not meeting the $1.2 billion in expected tax revenues. That led some to speculate that a tax revolt may be brewing. It's more likely, though, that this is simply a result of the confusion bedeviling taxpayers, as well as tax collectors.

Auditors have told the IRS to craft a better education campaign for medical device companies that may be unaware that they owe the tax, step up policing of firms that are outright ignoring it, and create less confusing tax forms in order to bolster compliance, writes healthcaredive.com.

While it's fair to say that there is bipartisan support for a repeal of the device tax—no politician has ever lost an election calling for fewer taxes—the latest vote by the House has little chance of being anything more than a talking point on the campaign trail. Senate majority leader Harry Reid (D-Nev) is steadfast in opposing any changes to the Affordable Care Act and President Obama has made it clear that he will not consider a repeal of the device tax that does not include a palatable alternative source of revenue.

Norbert Sparrow

Norbert Sparrow is Senior Editor at PlasticsToday. Follow him on twitter @norbertcsparrow and Google+.

TAGS: Medical
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