Medical device tax and the iPhone: Grover Norquist’s anti-tax group jumps on new argument for repeal

MassDevice.com coverage of the medical device tax

Conservative tax-reform activist Grover Norquist is putting some of his organization’s muscle behind a mostly GOP-fueled effort to paint the medical device excise tax as a danger to smartphones and tablets.

In an op-ed for The Hill, Katie McAuliffe wrote that there is legitimate concern that smartphones, tablets and other hand-held devices could be unnecessarily taxed under the new 2.3% medical device excise tax because the FDA has not clearly stated whether or not mobile devices that run health apps could be interpreted as medical devices themselves.

"This is a legitimate question for clarifying tax authority, and a clear consequence of passing a monolithic bill without a thorough reading," McAuliffe wrote.

McAuliffe is the executive director for Digital Liberty, a sister organization of Norquist’s Americans for Tax Reform, which also shares the same address and telephone number as the conservative advocacy center,

Late last week, 6 GOP lawmakers from the House Committee on Energy and Commerce wrote a letter to FDA commissioner Margaret Hamburg to clarify the agency’s position on mobile apps and whether or not the technology would be considered medical devices subject to the new 2.3% excise tax. The agency has said in previous guidance on mobile health apps that mobile platforms such as smartphones and tablets would be considered medical devices based on whether or not the device was being marketed for medical use.

The lawmakers wrote that they were concerned about the "potential of ‘actual use’ becoming a factor in the future."

Further, they asked "Has the FDA discussed, prepared, or analyzed the effect of the medical device tax on smartphones (as well as tablets or similar devices) or the creators or distributors of applications for those products?"

In her piece for The Hill, McAuliffe wrote that the IRS decision to defer the taxation question onto the FDA was tantamount to turning the agency into a "a tax-collecting arm of the government rather than an agency focused on science and consumer welfare."

"Intellectually one would think that since the IRS says ‘The new tax also does not apply to the sale of any other devices that are of a type generally purchased by the general public at retail for individual use (the retail exemption)’ then apps would not be taxed. However, the FDA made it clear that they need to make a determination, so developers beware," she wrote.

The medical device tax has long been a target for Norquist, one of the most visible anti-tax activists in American politics. In March of last year, he framed the tax as a direct attack on senior citizens in an article for the Daily Caller.

"Who buys medical devices? Who buys pacemakers, wheelchairs and other costly medical devices? Seniors do," he wrote.

He was back at it in July, penning an op-ed for the Washington Times where he dubbed the landmark Affordable Care Act the "Obamatax," adding that "a vote for Mr. Obama is a vote for more than $5.5 trillion in higher taxes over the next 10 years."

"What medical devices?" Norquist asked. "Braces for your kids. A stent for your heart. A wheelchair. All the cool stuff you see in hospitals will now cost more in order to pay Mr. Obama’s tax on medical devices," he added.

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