The medical device tax is likely to quickly be on the chopping block under the incoming Donald Trump administration.
The 2.3% medical device tax, enacted as part of Obamacare in 2010, took effect at the beginning of 2013 but was tabled for 2 years last December as part of an omnibus tax and spending bill. The tax, a levy on all U.S. sales of prescribed medical devices, was slated to go back into effect at the beginning of 2018.
Trump and the incoming Republican-led Congress and Senate are likely to permanently repeal the tax in a step to appease medical device companies and the industry as a whole, while following the Republican credo of cutting taxes for large industries.
There are approximately 9,000 U.S.-based medical device manufacturers which provide about 520,000 U.S. jobs and produce $150 billion in direct sales, according to industry advocacy group AdvaMed.
Repealing the tax would further improve the already favorable tax profile of Medtronic (NYSE:MDT), 1 of the largest U.S. medical device companies. Two years ago, Medtronic did an “inversion” deal, which is when a U.S. company shifts its home base to another country, at least on paper, to cut its tax bills. Medtronic is now technically based in Ireland, though it is still managed in Minnesota.
Republican lawmakers have indicated that there’s little reason to fear that the tax will return, as they hope to not only overturn the tax, but are aiming at a full repeal of the Affordable Care Act. Senate Republican Leader Mitch McConnell said that repealing the ACA will be the 1st order of business in the senate when it meets in January.
Republican senator John Barrasso said he expects Obamacare will be repealed in a way that will circumvent expected Democratic resistance.
“The plan is to move the entire piece that we moved last year. And it did include the medical device repeal, so I would expect that to be part of the list as well. It’s to repeal the taxes related to Obamacare,” Barrasso told Reuters.
Repeal of the tax will remove approximately $2.5 billion in federal funding annually.
Material from Reuters was used in this report.