Bloomberg News

Congress Cuts Revenue in Consensus When Votes Don’t Count

March 26, 2013

The U.S. Senate has voted 79-20, a margin unusual in a closely divided chamber, to support repeal of a 2.3 percent tax on medical devices, one of the measures that helps finance President Barack Obama’s health-care law.

Yet even bipartisan support offers little chance of repealing the tax soon.

As Obama and Congress start examining taxes and tax exemptions for possible revisions as part of a broader move to ease the federal budget deficit, lawmakers say they are unlikely to act on individual taxes until they agree on a more comprehensive approach to taxation and spending.

“It sets the stage for some negotiations on it in the future,” said Senator Amy Klobuchar, a Democrat and leading opponent of the medical device tax whose state of Minnesota is home to device companies such as Medtronic Inc. (MDT:US)

The Senate’s March 21 vote was a non-binding resolution, adopted as part of its debate on a budget plan. The House voted 270-146 last year for repeal of the device tax, a measure that didn’t advance in the Senate.

The tax was authorized in 2010 as part of Obama’s larger health-care package. The Joint Committee on Taxation expects the levy to raise about $30 billion over 10 years to help finance the Patient Protection and Affordable Care Act the president pushed into law with a goal of providing health insurance for millions of uninsured Americans.

The industry has complained that the tax will cost jobs and impair innovation in the sector.

Revenue Offset

One of the reasons repeal is unlikely soon is that lawmakers disagree on how to offset the revenue the tax will produce. Also, tax legislation must originate in the House, and the Republican-run House doesn’t plan to pass any tax bills until it considers a broader rewrite of the U.S. tax code.

The tax has raised almost $200 million in the two months since it took effect.

Two leading Senate Democrats, Senate Majority Leader Harry Reid of Nevada and Finance Committee Chairman Max Baucus of Montana, voted against the resolution to eliminate the tax. Still, 34 members of the Senate Democratic caucus joined 45 Republicans in supporting the resolution.

“The importance of this vote cannot be overstated,” said Senator Orrin Hatch, a Utah Republican and ranking minority member of the Finance Committee who offered the resolution. “Democrats and Republicans have come together in recognizing how bad this tax is.”

Industry Reaction

Industry representatives praised the vote as a sign of momentum for repeal of the tax.

It shows that “clear majorities in the Senate and the House of Representatives recognize that the medical device tax needs to be repealed so that America’s medical technology community can spur growth and create the great jobs that come along with it,” said Mark Leahey, president of the Medical Device Manufacturers Association.

Defenders of the tax, including Baucus, are skeptical that such overwhelming support would still exist if repeal legislation came to the Senate floor as a proposed law rather than a non-binding measure.

“It’s a budget resolution,” Baucus said of the March 21 vote. “We’ll see.”

The White House also discounted the vote’s importance. The “purely symbolic vote has no bearing on the future of the Affordable Care Act and its implementation,” said administration spokesman Brad Carroll.

Under both Senate rules and the language of the Hatch amendment, repealing the device tax would require lawmakers to find $30 billion in savings from other programs or through new taxes to replace the lost revenue.

Hatch said he intends to continue his push for repeal.

To contact the reporter on this story: Aaron Lorenzo in Arlington, Virginia at alorenzo13@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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Companies Mentioned

  • MDT
    (Medtronic Inc)
    • $63.8 USD
    • 0.33
    • 0.52%
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