Excise Tax on Medical Devices Should Not Be Repealed, Industry Lobbyists Distort Tax’s Impact
from Center on Budget and Policy Priorities -
Excise Tax on Medical Devices Should Not Be Repealed
Industry Lobbyists Distort Tax’s Impact
By Paul N. Van de Water
Bills introduced in the House (H.R. 523) and Senate (S. 232) would repeal the 2.3-percent excise tax on medical devices that policymakers enacted in 2010 to help pay for health reform. The provision is sound, however, and the arguments against the tax don’t withstand scrutiny.
◾The tax does not single out the medical device industry for unfair treatment. The excise tax is one of several new levies on sectors that will gain business due to health reform. The expansion of health coverage will increase the demand for medical devices and could offset the effect of the tax.
◾The tax will not cause manufacturers to shift production overseas. The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt.
◾The tax will have little effect on innovation in the medical device industry. To the contrary, health reform may well spur medical device innovation by promoting more cost-effective ways of delivering care.
The Joint Committee on Taxation estimates that repealing the excise tax would cost $29 billion over the 2013-2022 period.[1] Repealing the tax would undercut health reform in at least two ways. Pay-as-you-go procedures would require Congress to offset the cost of repeal by increasing other taxes or reducing spending; one likely target would be the provisions of the Affordable Care Act (ACA) that expand health coverage to 27 million more Americans. Also, repealing the tax would encourage efforts to repeal other revenue-raising provisions of the ACA, which in turn would either require still more painful offsets or increase the budget deficit (if Congress failed to offset the cost).
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