Updated: Ding dong! The device tax is dead

December 18, 2019

It looks like the medical device industry will get an early Christmas present from Congress and President Trump: The House of Representatives approved a $1.4-trillion spending package yesterday that includes a permanent repeal of the 2.3% excise tax on most medical devices sold in the United States. The tax is part of the Affordable Care Act (ACA), aka Obamacare.

Current government funding runs out on Saturday, and lawmakers are rushing to approve the spending package before then and avoid a contentious shutdown like the one that interrupted government services at the start of this year.

The device tax has been suspended since 2014 and was slated to go back into full effect in 2020. As we reported earlier this month, a study from the Tax Foundation (Washington, DC), which describes itself as a nonprofit independent tax policy research organization, claimed that re-imposing the tax would result in the loss of more than 21,000 full-time jobs in the next two years and a $1.7 billion reduction in GDP. Industry also bemoaned the tax’s disproportionate impact on smaller companies and startups, because it taxes revenues, not profits.

The spending bill also calls for a permanent repeal of the so-called “Cadillac tax,” a 40% tax on generous health insurance plans, which was opposed by many unions that had negotiated health insurance plans for their members, reports Reuters. That tax was delayed and never went into effect. An industrywide insurance fee of about 2.5% to 3% imposed on premiums is also repealed in the spending package, said Reuters.

The Congressional Budget Office reportedly projects that a permanent repeal of the ACA-related taxes would save the medtech industry more than $380 billion.

Commenting on the bill, the Plastics Industry Association (PLASTICS) noted that after years of working toward a full repeal, "PLASTICS is excited to see the hard work of its members pay off with the end of the medical device tax—a measure that would’ve stifled innovation and increased the cost of health care nationwide." The association added that medical technology creates more than two million jobs directly and indirectly all over the United States. "Repealing the medical device tax will promote economic growth, jobs, research and development and manufacturing," it said. "Most importantly, repealing the tax will make it easier to ensure that patients can access life-saving care and treatment. PLASTICS and the entire medical device supply chain congratulate Congress and the White House for putting an end to a measure that would’ve done far more harm than good.”

The Senate is expected to approve the spending package and President Trump, through spokeswoman Kellyanne Conway, said that he would sign it into law.

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