IRS Moves Forward with Plans to Implement Medical Device Tax

Posted by Brian Buntz on February 3, 2012

UPDATE: On February 6, 2012, Todd Rokita (R-IN) sent a letter to House leadership asking for the medical device tax to be repealed. 

The IRS has recently released proposed regulations to implement the 2.3% medical device tax, which has been cast by critics as a "tongue depressor tax." The proposal includes exemptions for early-stage medical devices but, in general, does little to allay the concerns of the industry regarding the tax.

In response, AdvaMed and Erik Paulsen (R-MN) released statements calling for swift action to repeal the tax, which is scheduled to go into affect in 2013 and is expected to raise $20 billion.

This map, pulled from Batchgeo, shows the number of companies petitioning against the medical device tax. 

“[The proposed IRS regulations] highlights the need for prompt action by Congress and the Administration to repeal this anti-competitive, job-killing tax,” Stephen J. Ubl, AdvaMed president and CEO, said in a statement.

“Failure to repeal the device tax flies in the face of the President’s comments during the State of the Union about the need to reform our tax system to make our nation more competitive in the world market, a view shared by members of Congress from both parties,” Ubl went on to explain, adding that “the tax will create a number of complex administrative and technical burdens that must be addressed.”

Vice president of policy communications at AdvaMed Wanda Moebius explains that excise taxes have been traditionally applied to "low-tech" products such as tobacco, alcohol, and rubber tires. "[By contrast, medical device] products are complex, sensitive, made of components made by different manufacturers. There is a whole gamut of differences. All of these things need to be taken into consideration when one is putting together a tax regime."

Paulsen, citing the report from the Treasury Department, stresses the need for “fierce urgency” to repeal “this job-crushing tax on innovation before it is too late.” “Today’s move by the Obama Administration is further proof that the medical innovation tax will increase healthcare costs while putting thousands of jobs on the line.”

 —Brian Buntz

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