By Kristen Howard, CPA
The medical device tax could be repealed by the end of March 2015. The medical device tax was designed as a way to pay for “Obamacare”. A new bill was introduced by Rep. Erik Paulsen (R-Minn.) that would eliminate the 2.3% tax and refund companies for taxes already paid under the law.
During a recent news conference, Paulsen said, “Many of us were saying from the outset this is a very ill-conceived idea. You’re going to have fewer startups, less ideas in the garage.”
The medical device tax is a 2.3% excise tax on the sale of certain medical devices by the manufacturer or importer of the device. The tax applies to the initial sales price of devices including bandages, mobile x-ray systems, non-absorbable silk sutures, nuclear magnetic resonance imaging systems, heart valves, and pacemakers, to name a few, sold to “medical providers” since 2013. Eyeglasses, contact lenses, hearing aids, and any other device that is sold as a retail product to the general public are exempt from the medical device tax.
Repealing the 2.3% medical device tax has support from state lawmakers in states with medical device manufacturing industries. However, the repeal could be hindered if lawmakers cannot find a way to offset the $30 billion in revenue the tax is expected to generate in just over a decade. The supporters of the tax say that the tax has only minor effects on the industry. Paulsen and Rep. Ron Kind (D-Wis.) are confident however, that both parties and chambers can find a way.
Historically, the Obama administration has threatened to veto device tax repeals, without an offset for the $30 billion in revenue the tax is expected to generate.