White House threatens to veto Paulsen’s medical device tax bill

WASHINGTON – The Obama Administration has threatened to veto legislation put forward by Minnesota Republican Congressman Erik Paulsen that would overturn a tax on medical devices that was part of the 2010 health care overhaul.

The House is set to vote as early as Thursday on Paulsen’s bill, which has 240 cosponsors from both parties. Paulsen has made the bill one of his biggest priorities in Congress, calling it “a tax on innovation” that will hurt Minnesota’s medical device industry.

House Republicans have opted to offset the $29 billion cost of repealing the tax by increasing the amount middle class taxpayers would have to repay the government for subsidies they receive to buy health insurance but don’t fully use.

In a statement of official policy to Congress, the Office of Management and Budget said the bill would expand the number of Americans without health insurance while funding “tax breaks for industry by raising taxes on middle-class and low-income families.”

The 2.3 percent excise tax was included in the health care law in order to fund an expansion of heath insurance to those who currently do not have it. Minnesota lawmakers, including Democrats, fought hard against the provision during the health care debate and managed to halve the size of the tax and delay its introduction. It now goes into effect in 2013.

As reported by MPR News earlier this week, Paulsen’s bill has put some Minnesota Democrats in a political bind between supporting a local industry and chipping away at a health care law that almost all of them supported. On Wednesday, DFL U.S. Rep. Tim Walz announced that he would support a repeal of the tax.

While the legislation is almost certain to clear the House, it’s unlikely to receive a vote in the Democratic-controlled Senate.

UPDATE

In a brief statement, Paulsen said the administration’s veto threat would not deter Republicans from bringing up the bill.

“American leadership in medical device innovation, and the nearly half million U.S. jobs it supports, is worth fighting for,” said Paulsen. “With the backing of more than 240 of my colleagues from both sides of the aisle, I look forward to bringing this bill to the House floor tomorrow to do the right thing and stop this ill-conceived and wrong-headed tax in its tracks.”

  • http://simplemindedinvestor.com Ross Williams

    “The Obama Administration has threatened to veto legislation put forward by Minnesota Republican Congressman Erik Paulsen”

    I’m trying to find the support for that claim. Clearly the Administration opposes the legislation. But where is the veto threat?

  • Brett Neely

    Ross,

    Please see here for OMB’s Statement of Administration Policy: http://www.whitehouse.gov/sites/default/files/omb/legislative/sap/112/saphr436r_20120606.pdf

    At the very end, it says, “If the President were presented with H.R. 436, his senior advisors

    would recommend that he veto the bill.”

  • lisa

    I totally agree with Paulsen. By taxing the devices, that my husband has designed & now sells, it really does kill & penalize innovation & technological advances that millions of baby boomers are going to depend on in the coming years. I love Obama, but this one really irks me.

  • http://www.mnpolticalroundtable.com Mac Hall

    Did you notice that Eric Cantor now lists a different title for the legislation — HR 436

    ­‐ Health Care Cost Reduction Act of 2012 ?

    I wonder how many representatives actually read the report that Diana Furchtgott-Roth and Harold Furchtgott-Roth wrote … that was paid for by the Medical Device industry which is the basis for the projected job losses. link.

    Bloomberg did a review and found it to be questionable link … which I found a “generous” observation … anyone who read the report should have see clearly that it states it cannot predict job losses … and then gives a variety of possiblities. Considering the number of newly covered individuals, it is more likely that the industry will have growth in sales.

    Lastly, remember that the healthcare reform legislation included a 10% tax on tanning bed salons which went into effect in 2010 for indoor tanning customers. and that was to be a “job killer” … have you walked by tanning salons and noticed empty wating rooms … not me, everytime I walk by, it is full with folks going in and out all day. Despite the efforts from both the medical community and the federal government, tanning is as popular as ever. Three-fourths of salon owners say business has been steady despite the tax.

    Now, if people are willing to pay a 10% tax to use a tanning bed, which I would describe as a personal choice without medical necessity … do you think that the guy that played high school football and that “old knee” needs to be replaced at age 50 will be glad to pay an additional 2.3% for his Zimmer knee replacement now that ObamaCare will allow for him to get the operation now. Remember if you read the report, it acknowledges that most manufactures will be passing this excise tax onto the customers, so there is no reason to think that there will be any job losses.

  • http://www.mnpolticalroundtable.com Mac Hall

    One of the big compaints about ObamaCare was that it was constructed in backrooms and without proper financial evaluation (personally, since there was so much discussion, town hall meetings, live hearings, I think that was overblown.)

    Yet, here we have a bill that Erik Paulsen passed through his Ways and Means Committee without a determination of where the 29.076 BILLION DOLLAR offset would come from … now, the offeset has been determined … from Bloomberg :

    The House bill would cover the estimated $29 billion, 10- year cost of repealing the device tax by changing rules governing what happens when taxpayers qualify for insurance subsidies under a prior year’s lower income and then make more money than expected.

    As written, the health-care law limited what those people would have to repay. The House bill would make them return all overpayments, and most Democrats oppose that change, saying it would penalize taxpayers for getting bonuses or raises.

    Has the CBO evaluted the bill ?

    Previously, the Joint Committee on Taxation advised Ways & Means the $29.076 Billion …and it was laid out over a ten year period.

    What the Republicans want us to believe is that the excise tax will go into effect on January 2013 but the benefits insurance subsidies will not kick in until 2014 … then if someone gets a raise or bonus, that would not be known until 2015 the amount to be repaid … so, in 8 years they think that $29.076 Billion can be generated from people moving off the subsidies ?

    That old adage seems appropriate : If it sounds to good to be true, it probably is.

    Let’s just say what this is — a “political vote in an election year” … after all, if the Supreme Court rules that ObamaCare is unconstitutional, then the excise tax is gone … the House could and should delay this vote until after the July ruling is announced … I would rather see them vote on the Workforce Improvement Act of 2012 before this … but that is being held up in John Kline’s committee … even though he has sent out three press releases encouraging its passage.

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