UPDATED Dec. 17, 2015, with news of House vote advancing omnibus bill, passing tax bill.
The 2-year delay of the medical device tax would take $3.4 billion from the federal budget in 2016 and 2017, according to an estimate from the non-partisan Joint Committee on Taxation.
The 2.3% excise tax, enacted in 2010 as part of the Affordable Care Act, went into effect at the beginning of 2013. It applies to all U.S. sales of prescribed medical devices. An omnibus spending bill introduced this week includes a provision that would put a 2-year pause on the medtech levy and on the so-called “Cadillac tax” of 40% on high-benefit healthcare insurance policies.
Pausing the medical device tax would mean a budget hit of -$1.40 billion in calendar 2016 and -$1.96 billion the year after, the Joint Committee on Taxation said yesterday. In June, the Congressional Budget Office estimated that a House bill to repeal the tax would mean net deficit increases of $1.83 billion in fiscal 2016 and $1.96 billion the following year. Repealing the tax would add about $24.4 billion to the deficit from 2015 to 2025, according to the CBO.
Today the House voted 240-185 on a party-line split to approve rules for debating the $1.1 trillion U.S. government spending bill and a companion $680 billion tax package, which together would fund federal government agencies through Sept. 30, 2016, and lift a 40-year-old ban on U.S. crude oil exports.
The lower chamber then passed a massive tax bill that makes permanent and enhances tax credits to aid business research and development, the working poor, children and other temporary tax breaks as lawmakers moved to avoid a government shutdown.
The measure, passed by a vote of 318-109 in the Republican-led House with some support from Democrats, is expected to increase U.S. deficits by $622 billion over 10 years.
House Democratic leader Nancy Pelosi (D-Calif.) said she’s not confident that enough Democrats will support the massive government funding bill to ensure its passage, although she plans to vote for the must-pass legislation. Democratic votes are likely needed given opposition from some conservative Republicans.
“We have serious unease in our caucus,” Pelosi told reporters at a news conference, adding that a provision to lift the ban on exporting U.S. crude oil is the top obstacle in gaining enough Democrats’ support.
The House is slated to consider the spending measure tomorrow. Senior Senate aides have said the 2 measures would likely be combined in that chamber and considered in a single vote tomorrow.
The medical device industry has fought tooth-and-nail against the tax since it was 1st floated as a way to fund the Affordable Care Act. Since then, numerous bills to do away with it have circulated on Capitol Hill, including the “Protect Medical Innovation Act of 2015,” sponsored by Rep. Erik Paulsen (R-Minn.), that the CBO evaluated last summer. In June, 46 Democrats joined the vote to approve the Paulsen measure; in August, the Senate said it would take up a companion measure before the end of the year, although those plans might be obviated if the omnibus spending package goes through.
Estimates of the impact of the medical device tax have varied wildly since its 1st airing in 2009; 4 years of political deadlock, which included a federal government shutdown over the issue, have done little to add clarity. Federal government officials have projected that the tax will raise about$30 billion over 10 years. Back in July 2013 a report released by a coalition of medical device lobbying groups estimated that the tax had cost the industry $1 billion during the 1st 6 months of that year.
In July 2014, MassDevice.com learned via a Freedom of Information Act request to the Internal Revenue Service that the tax bureau collected only $1.4 billion from the medical device tax in 2013, far short of all predictions. An audit by a U.S. Treasury inspector general revealed that the IRS collected a little more than $913 million during the 1st half of 2013, well shy of the $1.2 billion it expected the tax to bring in.
Material from Reuters was used in this report.