Taxes are everywhere, but device makers are still exercised over the 2.3% excise tax on their offerings. Corporate tax reform, too, looms as a policy issue in our nation's capitol, but what are the odds Congress will pass and the President will sign legislation dealing with either of them? A quick read of the tea leaves, as it were, suggests the odds are not very good.
Klobuchar; corporate tax reform on the rocks
Sen. Amy Klobuchar, no novice where the device tax is concerned, appeared at last week's meeting of the Medical Device Manufacturers Association, and she briefly discussed both these tax policy issues. On the point of corporate tax reform, Klobuchar indicated it won't happen this year, which means it won't happen at all in the 114th Congress because next year is an election year.
Klobuchar indicated an interest in finding a way to incent corporate America to repatriate overseas revenues as a means of funding infrastructure, but this is no novelty on her part. The Obama administration laid out just such an argument the day before Klobuchar spoke at MDMA, according to a recent story, so Klobuchar's line appears to be that of President Obama.
The story at Yahoo news indicates that the Obama administration feels it has done all it can toward a compromise framework for legislation, so clearly corporate tax reform won't happen before 2017, especially since the administration's OMB director Shaun Donovan made it clear that the administration is asking corporate America to take a significant financial loss out of "a sense of patriotism." As if shareholders are going to take a hit for patriotism in this economy.
Mr. President, may I clue you in on something? Any CEO who goes along with this at the expense of his or her shareholders won't have a job for long. But you already know that, don't you?
Paying for the pay-for
Democrats do not hold the majority in the Senate, but Republicans have to get to at least 60 votes to get any kind of device tax repeal legislation through, unless it's tacked onto something the White House sees as a must-pass. The problem here is that everyone in the Democratic Party who has talked about the device tax recently kept saying "offsets" and "pay-fors."
First, Sen. Debbie Stabenow repeatedly cited the need to continue offering coverage under health insurance exchanges, something the device tax is designed to subsidize. Stabenow repeatedly circled back to this, probably because she was the only Democrat who bothered to attend the April 23 Senate Finance Committee hearing on the device tax.
As much as Stabenow tried to make nice about the problems the device tax creates, she also resumed the discussion of a "fiscally responsible" approach to repeal. In case you didn't get the flyer, "fiscally responsible" means "offsets."
In her remarks to the crowd at MDMA, Klobuchar wasn't exactly arguing against a pay-for, either. She referred to the fact that the Affordable Care Act has cost less than anticipated, which she conceded is "not officially a pay-for," but she said it offers "a good argument for repeal."
One is well advised to avoid saying, "never," but the GOP has only 54 seats in the Senate, so a veto-proof majority of 67 might be asking a lot in the event of a stand-alone device tax repeal bill. Many members of the GOP will remark that about $140 billion of the 10-year doc fix projection was not paid for, so they'll ask why Congress should worry about an unpaid device tax repeal when it'll cost about one seventh of the unpaid portion of the SGR bill.
It's a fair question, but the answer is not forthcoming because underneath it all, the vast majority of Senate Democrats really don't want to repeal this tax.