Tea Party may have hurt chances for device tax repeal

  • Article by: JIM SPENCER , Star Tribune
  • Updated: October 21, 2013 - 4:29 PM
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Associating the medical device tax repeal with the government shutdown or potential default “was not a savvy move,” said Rep. Keith Ellison, D-Minn.

– Business and political leaders trying to repeal the medical device tax connected to national health care reform hope to build on the publicity the tax received during the recent government shutdown and debt ceiling crisis.

But as the nation’s budget negotiations continue in the weeks ahead, the push to kill the device tax as part of the ill-fated effort to defund the Affordable Care Act, often called Obamacare, may have created as many problems as opportunities for those who want the tax dead.

Repealing the device levy became “the shield at the front of the army” of Tea Party congressional lawmakers who pushed for a shutdown and near default to eliminate Obamacare, said Don Kettl, dean of the University of Maryland’s School of Public Policy. Fair or not, the medical technology industry’s goal to kill the tax will be associated with the fallout of that political failure, he added.

“[Devicemakers] were swept underneath the same tent,” Kettl said. “They ended up finding themselves aligned with it.”

Lawmakers who pushed the device tax repeal into the battle strongly reject the notion that their goal has been compromised.

“I don’t have any reservations that [device tax repeal] has been tarnished at all,” said Republican Rep. Erik Paulsen of Minnesota, who wanted the tax’s repeal made part of any House budget bill. “If anything, we have gained more support going forward.”

Devicemakers, including hundreds from Minnesota, have been paying the 2.3 percent tax on certain device sales since Jan. 1, pouring an estimated $2 billion into the federal treasury. The collections help pay for the expansion of health care coverage under Obamacare.

But the device tax is the bane of Minnesota’s mammoth medical technology sector. Device companies say the levy will stifle employment and innovation, asserting that the tax could cost 43,000 jobs over the next decade.

The tax’s supporters, however, say any ill effects are overstated because Obamacare will provide devicemakers with enough newly insured patients to offset the cost of the tax.

Ultimately, a repeal of the device tax was not included in last week’s legislation to reopen the government and raise the debt ceiling. But the decision to include an elimination of the tax in the Republicans’ unsuccessful attempt to defund Obamacare has sparked differing views about the tactical wisdom.

Paulsen concedes that Tea Party demands to kill or diminish President Obama’s signature legislation kept the device tax repeal from playing a more positive role in the shutdown/debt ceiling saga.

“If we [Republicans] had more realistic attitudes or expectations about what was achievable, [repealing the tax] could have been the linchpin that would have solved the whole impasse a whole lot earlier,” he said.

Still, Paulsen expects the device tax repeal to be part of a budget deal required by Dec. 13 under legislation passed last week to reopen the government and raise the debt limit. If not, he expects it to be part of a tax reform plan or part of a continuing resolution funding the government.

Sen. Amy Klobuchar, a Democrat who worked with a bipartisan group to fashion a compromise last week, attempted to get the device tax repeal — or a two-year timeout for collecting it — into the final agreement that reopened government and raised the debt ceiling. Still, she remains optimistic about the chances of killing the tax.

“I think it’s pretty clear that it will continue to be on the table going forward,” Klobuchar said.

Former Minnesota congressman Vin Weber, now a Washington lobbyist, said having the device tax repeal mentioned in talks among Senate moderates should “immunize” the device industry from any association with the negative politics of the shutdown and debt ceiling debate.

Putting the device tax repeal into the House’s proposal for ending the government shutdown attracted “unprecedented attention,” even though it failed, said Stephen Ubl, head of the Advanced Medical Technology Association, the device industry’s leading trade group. He, like Paulsen, thinks the device tax repeal benefited from the attention.

But the public will also focus on the shutdown and why the device industry was singled out among all the health-care-related businesses being asked to help pay for Obamacare, said congressional expert Norman Ornstein of the American Enterprise Institute.

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