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BioWorld - Saturday, February 27, 2021
Home » Blogs » BioWorld MedTech Perspectives » The device tax repeal effort: RIP

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The device tax repeal effort: RIP

Jan. 7, 2013
By Mark McCarty
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He'll get his, but what will you get?

I come not to praise the effort to repeal the device tax, or even to criticize it. I’m just here to give it a proper burial because it has been one heck of an effort. Industry continues to assert it will do everything it can to peel this tax monkey off its back, but there are a number of reasons I believe it’s just not going to happen.

But that doesn’t mean all is lost.

The first reason I see the device tax repeal as a goner is that President Obama has already made it clear he has zero interest in a repeal or even a suspension of the device tax. While it’s true that Congress starts bills, it’s also true that the White House finishes bills, both in the sense that the president signs a bill or delivers a coup de grâce to the legislation. It’s pretty clear which way this administration leans on this tax.

Another reason I think the device tax is here to stay is that there aren’t enough Senate leaders interested in erasing it from the books. Senate majority leader Harry Reid is a close ally of the White House as his remarks in the presidential campaign of 2012 make clear, and Max Baucus, the father of the device tax, is still the chair of the Senate Finance Committee. It’s tough to say what the incoming chair of the Senate Budget Committee might think about it, but if Congress is stingy enough to hold $50 million a year in patent fees from the Patent and Trademark Office, how on earth will our elected officials keep their mitts off $2 billion a year to help finance the Affordable Care Act?

The third and final reason I think the device tax is dead is that Congress and the White House have yet to hash out the budget sequester and the debt ceiling, and there are those who believe these two issues will prove at least as contentious as the income tax issues just “resolved.” By the time they hammer those two out, it will be time to take up the corporate income tax issue. And that’s where things might get interesting.

The advantage to making up the device tax via the corporate income tax is that it’s not just device makers who argue the U.S. corporate income tax is too high. It’s just about everyone who pays the tax. Device makers won’t have to go it alone on this argument, which will be taken up by industries that government actually likes, such as green energy.

Some might think that raising one tax and lowering another is just a shell game, but the cash in the Treasury isn’t always as fungible as one might think, at least not politically. This is especially true where the Affordable Care Act is concerned, the accounting for which was regularly criticized by Rick Foster, the outgoing chief actuary at the Centers for Medicare & Medicaid Services.

If anything, all the accounting improbabilities – which would land a corporation in court with the Securities and Exchange Commission draped around its neck – make it even more compelling for Washington to keep the device tax and make it up someplace else.

Hence, I conclude the device tax repeal effort is dead. Long live the new corporate income tax rate.

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