Medical device tax survives latest repeal effort

  • Article by: JIM SPENCER , Star Tribune
  • Updated: May 23, 2014 - 8:02 PM

The industry has long fought the sales levy that came in as part of federal health care reform.

– The federal medical device tax that is an ongoing target for the nation’s medical technology sector, including hundreds of businesses in Minnesota, has apparently survived another attack.

Senate Majority Leader Harry Reid recently refused to allow an amendment that would have suspended collection of the tax for two years to be attached to a bill that extends current tax measures that are set to expire.

The move likely puts off any action that can actually stop collection of the 2.3 percent levy on device sales for months, if not years.

The tax, projected to yield billions of dollars to finance national health care reform over the next decade, has been in the cross hairs of industry lobbyists since its inception. They say it costs jobs and innovation.

Supporters say it is a fair contribution by the device industry to health care reform that could increase business for companies involved in medical technology.

The effort to kill the tax intensified when the government actually began collecting it in 2013.

Reid’s actions frustrated Minnesota Democratic Sen. Amy Klobuchar, who offered the suspension amendment along with Republican Sen. Orrin Hatch of Utah. Minnesota Sen. Al Franken, a Democrat, also supported the suspension.

“I don’t agree with Senator Reid on this,” Klobuchar said in an interview. “That does not mean we cannot have this in serious play with the House in the next few months.”

Franken called action on the device tax “a moving target.”

“I was looking for a suspension of [the tax for] two years so we could work on it in overall tax reform.”

The only way suspension seems procedurally possible in the near future is for the Senate to enter negotiations with the House in a conference committee to discuss the House’s recent tax legislation. But that can’t happen until the Senate passes a tax extension bill.

In a kind of Catch-22, Reid’s refusal to allow a vote on stopping the device tax led Senate Republicans to block passage of a tax extension bill.

Meanwhile, the House is not even considering a tax extension bill, said Republican Rep. Erik Paulsen of Minnesota. It is voting to make permanent certain parts of the tax code that are set to expire.

The House has already passed a bill making permanent a tax credit for research and development. Still to come, said Paulsen, will be legislation to make permanent rules that increase the speed with which small businesses can write off purchases of capital equipment.

The net effect of all these vagaries is that the device tax remains in effect, though it could be reconsidered in a year or two as part of comprehensive tax reform. It is then that Klobuchar and Franken, who supported health care reform, hope to find a way to offset the revenue that will be lost if the device tax goes away.

Paulsen, who has led the fight against the tax in the House, hopes for something sooner.

“The House is on record as wanting to repeal the medical device tax,” Paulsen said. “If the Senate can pressure Reid for a vote, I think it would pass.”

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