Resources

Thomson Reuters Tax & Accounting News

Featuring content from Checkpoint

Back to Thomson Reuters Tax & Accounting News

Subscribe below to the Checkpoint Daily Newsstand Email Newsletter

Republican knives out for Obama’s medical devices tax

WASHINGTON (Reuters) – Republicans in the U.S. Congress will move soon to kill a medical device tax that was imposed less than two years ago under President Barack Obama’s healthcare law, congressional aides and analysts said on Wednesday.

The 2.3-percent excise tax on sales of most medical devices sold in the United States helps fund the healthcare law, known as Obamacare, and applies to products ranging from bedpans to costly heart pacemakers. It took effect in January 2013.

Last week’s elections will elevate Republican Senator Orrin Hatch, a long-standing opponent of the tax, to the chairmanship of the tax-writing finance committee in the Senate.

Though no full-scale repeal of Obamacare is expected, even with the Senate under Republican control, the move against the device tax is part of efforts to chip away at the law.

“The senator will continue to examine and support every viable opportunity to permanently repeal Obamacare‚Äôs onerous tax on medical devices,” said his spokeswoman Julia Lawless.

The Senate in March 2013 approved a symbolic resolution calling for repeal of the tax, with more than 30 Democrats joining Republicans in support of the non-binding measure.

Opposition to the tax is also widespread in the House of Representatives, so there is a strong chance it could be repealed. Republicans held the majority there even before the elections and voted on 50 occasions to repeal all or part of Obamacare.

“Repeal of the medical device tax has once again become a rallying cry for the Republicans … and now they have the congressional majority to potentially do something about it,” said analysts at BernsteinResearch in a client note.

The tax has been projected to raise about $30 billion a year in government revenue over 10 years. Medical device companies have lobbyied against it on Capitol Hill.

Repeal could boost their profits by 1 to 5 percent a year, the Bernstein analysts said, naming possible beneficiaries as Medtronic Inc, Johnson & Johnson, Abbott Laboratories, Baxter International, St. Jude Medical Inc and Stryker Corp.

One way for Republicans to proceed could be for the House to approve a bill and send it to the Senate. But Republicans there might have difficulty getting enough votes to overcome a likely veto by Obama. A budget process path is also a possibility.

(Editing by Andrew Hay)