Rep. Erik Paulsen (R-Minn.) pressed an IRS representative for answers on the medical device tax during a hearing at the U.S. House of Representatives this week.
The tax, a 2.3% levy on all U.S. sales of medical devices, is set to go into effect Jan. 1, 2013. Paulsen asked IRS deputy commissioner Steven Miller whether the tax agency has given any consideration to the administrative burden complying with the tax would entail.
"Now that we’re moving forward to January 1st, these companies are laying off employees already. I want to make sure that we’re taking into account the paperwork," Paulsen said during the House Ways and Means Subcommittee on Oversight hearing on implementing President Barack Obama’s healthcare reform law.
"We’re working hard. We have proposed regulations out on the medical device tax and we’re working with the industry to make sure not to burden them and make sure they know the rules for compliance," Miller said.
Paulsen also and questioned whether an excise tax is appropriate for products such as medical devices. Excise taxes are more commonly applied to products like alcohol, tobacco or low-mileage automobiles.
"The public policy rationale in the past for excise taxes has historically been to deter certain activities," Paulsen said. "In my mind the last thing we want to do is deter the creation or innovation of these live-saving, live-improving devices."
Miller said the IRS is responsible only for meeting its statutory obligation to implement the rules, telling Paulsen he couldn’t comment on whether an excise tax is appropriate for medical devices.
Watch Rep. Paulsen question IRS deputy commissioner Steven Miller on the medical device tax
“We continue to hear of American companies already beginning to lay-off employees in anticipation of this dangerous new tax,” Paulsen said in prepared remarks. “We need to be doing everything we can to repeal this tax not only because the administration seems to be ill prepared for its implementation, but more importantly, because it will cost this nation valuable jobs in a valuable industry.”
For its part, med-tech industry lobby AdvaMed called the tax "a blunt and damaging instrument being applied to highly innovative and dynamic industry."
"The medical device tax is one of the few IRS-administered provisions that goes into effect in 2013. Even apart from the destructive $30 billion economic burden of the tax, the mechanics of implementing it will be extremely challenging both for companies and for the IRS. It is vastly more complicated than a typical excise tax, and compliance by companies in our industry will be both costly and burdensome," AdvaMed president & CEO Stephen Ubl said in a press release. "We look forward to the opportunity to continue to work with the IRS to address implementation concerns."
