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The push to repeal the Affordable Care Act’s tax on medical devices has somehow become a touchstone for GOP efforts to chip away at President Obama’s health care law. But why? To paraphrase Bogart’s classic line from Casablanca: Of all the taxes in all laws in all the world, why did they pick this one?
The medical device tax was hardly the only business tax in the law. Insurance providers and brand-name drug makers also got hit. And it was far from the biggest. The tax on insurers is expected to raise $102 billion by 2022 and drug makers will have to pay about $34 billion. By contrast, the device tax is projected to raise only about $29 billion.
The theory behind all three taxes was identical. Congress felt that each of these industries stood to profit significantly from the health law. More people would get insurance, of course. And the newly insured were more likely to buy devices or costly branded drugs. So each was hit with a sort of windfall profits tax.
It is perfectly reasonable to question this policy of giving with one hand and taking with the other. Should producers of goods and services be required to kick back to government some of their increased profits when they benefit from a new federal law? That’s a good question.
But whatever your answer, it is tough to explain why some industries should be taxed while others should be exempt. So back to where we started: How did the device tax become become the one ACA tax Republicans have targeted for their own legislative death panel?
Best I can tell, there are two reasons. They are both about politics. Neither has anything to do with policy logic.
The first is that the tax is a juicy target of opportunity. It happens that some key Democrats are carrying the water for their home state device makers. For example, liberals such as Elizabeth Warren of Massachusetts and Al Franken of Minnesota were among 34 Democrats who backed repeal in a non-binding 2013 test vote.
If Republicans can line up a significant number of Democrats next year, they get an easy win and make the case that there is bipartisan opposition to the ACA (even though nearly all these Ds support the guts of the law).
The second reason has to do with history. Back in 2010, many device makers opposed the ACA. But big drug makers and much of the insurance industry backed the bill. ACA critics, who have long memories, are not going out of their way to bail out industries that were on the other side of health debate four years ago. One industry lobbyist told me, “They’ll never forgive us for this. We’ll be paying this tax forever.”
Maybe, although other industry insiders think repealing the device tax will be just the first step. By that theory, once the device tax is history, it will be easy for ACA critics to argue that the other levies should go to. Out of fairness, of course.
None of these taxes is critical to the future of the law. The ACA’s insurance and delivery reforms will stand regardless of what happens to them. If all three taxes are repealed, the nation's debt will increase by another $165 billion, of course. But you won’t hear very much talk about that next year.
That leaves only the question of whether device makers deserve a $29 billion windfall for no particularly good reason.
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