Under Trump, Congress Likely to Pull Plug on Medical Device Tax
The chief executive of OrthoPediatrics Corp, based in northern Indiana, said his company has been able to hire more workers since the temporary suspension effective last January of a federal tax on medical devices. The tax was imposed as part of outgoing President Barack Obama’s signature 2010 healthcare law.
Throdahl said he hopes the incoming Republican-led Congress and president will permanently repeal the tax.
Trump and U.S. lawmakers are likely to do that, according to lawmakers, lobbyists and industry executives, in a step that also would help larger medical device makers such as Medtronic Inc, Boston Scientific, St. Jude Medical Inc and Johnson & Johnson.
Tax cuts are Republican gospel, and Trump’s new Republican administration is widely expected to make them happen.
The medical device tax may be one of the first on the chopping block. It was first imposed in January 2013 as a funding mechanism for the Affordable Care Act, dubbed Obamacare, a law that has brought medical coverage to millions of previously uninsured Americans. But Republicans hate Obamacare and this particular tax has powerful enemies in both parties.
Senate Republican Leader Mitch McConnell said repealing the Affordable Care Act, dubbed Obamacare, will be the first order of business in the Senate when it convenes in January.
Whether cutting taxes, including the one on medical devices, will deliver more jobs remains to be seen. The Congressional Research Service, a nonpartisan arm of Congress, said in January 2015, when the medical device tax was fully in effect, that it was having only “fairly minor” impact on production of devices and employment in the industry.
That may not matter much, as Republican lawmakers and lobbyists increasingly try to link tax cuts to job creation, perhaps sensing this connection will resonate with Trump, who made big promises in his campaign about restoring U.S. industrial employment.
The medical device industry, in its long-running assault on the device tax, is seeking to frame the fight as a jobs issue.
Immediately after Trump’s Nov. 8 election victory, industry lobbying group AdvaMed wrote to him and Vice President-elect Mike Pence, Indiana’s governor, asking for permanent repeal of the tax.
In the letter, AdvaMed President Scott Whitaker wrote, “The medical device tax has been a significant drag on medical innovation, and resulted in the loss or deferred creation of jobs, reduced research spending, and slowed capital expansion.”
Industry complaints like these led Congress last year to temporarily suspend the 2.3 percent excise tax on the sale of non-retail medical devices, such as pacemakers, heart valves and artificial hips. It had been in effect for only three years.
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