The National Venture Capital Assn. has the impending medical device tax in its cross-hairs as a top priority for take-down, according to the organization.
The 2.3% medtech tax, taking effect January 1, 2013, has long been on the group’s hit-list, but the NVCA seems to have a renewed sense of urgency and momentum following the recent election. The device tax "could be looked at early in the new Congress," depending on how the legislative body handles issues such as the "fiscal cliff" before the new Congress is seated.
"The House passed legislation to repeal the tax this Congress but the Senate Democratic leadership has been reluctant to debate any provisions to the [Affordable Care Act]," according to an NVCA report. "With the election over, the Senate Democratic leadership might be willing to debate the issue in the context of overall tax reform."
Framing the issue as one focused around tax reform, rather than healthcare reform, is a shared vision among medical device industry groups as well.
In February medtech lobbying group AdvaMed released a set of principles for modifying the U.S. tax system, hoping to attract Democratic support for striking the tax. The new persecutive has been featured in much of the group’s rhetoric since then, including in a report released this morning that estimated that the tax will effectively raise the industry’s federal tax burden by about 30% from 2012 to 2013.
AdvaMed remains “cautiously optimistic” that they will take down the tax before it takes effect at the start of next year, but the NVCA took a more wary approach on the politics of striking the levy and eying options for relaxing the tax should repeal efforts fail.
Medical industry groups are actively targeting the so-called “lame duck” period between election day and the seating of a new Congress as a time to push repeal, and have organized an executive fly-in, planning on blanketing Capitol Hill with medtech leaders who will meet with key lawmakers to discuss the tax.
AdvaMed has been unwilling to discuss back-up plans or modifications to the tax that might ease the burden for smaller companies, focusing all its efforts on repeal, but the NVCA noted the possibility that, while Republicans and Democrats may agree that the tax is a bad one for industry, how to make up for the nearly $30 billion the levy is expected to raise over 10 years may continue to divide supporters.
"While there’s a possibility that this could be addressed during the lame duck session, no one has yet tackled the other part of the debate: how to find a $30 million "pay for" for repeal," the NVCA wrote. "If the industry is unsuccessful in getting an outright repeal, there could be an appetite to provide at least small company relief as a last case scenario."
Earlier this year the U.S. House of Representatives voted 270-to-146 in favor of repealing the medical device tax, but efforts to push a similar measure have failed to muster much support in the Democrat-controlled Senate.
Democratic Senators flayed the tax repeal bill after the GOP proposed a pay-for designed to take a stronger hand in recouping over-paid health insurance tax credits granted to families. The pay-for measure could have raised as much as $43.9 billion over 10 years, but the move offended many Democrats who viewed it as a choice between a strong industrial interest and families facing difficult circumstances.
Meanwhile, AdvaMed and other medtech industry groups are reluctant to consider alternatives to full repeal.
"We’re trying to think about too many hypothetical scenarios where we’re not successful this year," AdvaMed senior executive vice president David Nexon told reporters today. "If we are unsuccessful this year, which I don’t think we’re ready to concede, but if we are and we get into next year and there’s a tax reform discussion, I think we would certainly want to be part of that discussion."