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Will the Medical Excise Tax Be Repealed?

  • Oct 28, 2013 | Gail Cole

 Pacemakers are subject to the medical device excise tax.

2013 opened with a new medical device excise tax (MDET), one of the first aspects of the 2010 Affordable Care Act to take effect. It is not a popular tax. Medical device manufacturers have fought the MDET since it was first proposed and they continue to do so--just as many lawmakers continue to fight the Affordable Care Act itself. Moves to repeal the MDET and terminate the Affordable Care Act were repeatedly raised during the recent partial government shutdown.

Majorities in both parties and in both chambers have voted to repeal the MDET in the past, in part because the medical device industry is large and has a strong presence in many states. 79 Senators voted to repeal the tax back in March, while only 20 senators voted to keep it. The House voted by a wide margin to repeal it in June.

Despite repeated calls and votes for repeal, the medical excise tax persists. And so the fight continues. According to Senator Joe Donnelly (D-IND), “This is something that leaders of both parties know is a high priority for a number of members, both Democrat and Republican.”

Proponents of the repeal insist the tax will cripple the medical device industry and force thousands of jobs overseas. Already, Cook Medical, one of the largest privately held medical device firms in the world, has said it “halted plans to build plants in the Midwest because of the tax.” In spite of that, Factcheck.org (of the University of Pennsylvania’s Annenberg Public Policy Center) has concluded that claims of lost jobs and a crippled industry “are exaggerated.” And supporters of the tax say its economic impact will eventually be offset by new business generated by an increase in health coverage due to the Affordable Care Act.

The medical device excise tax imposes a 2.3% excise tax on “the sale of any taxable medical device by the manufacturer, producer, or importer….” Taxable items include artificial hips and knees, CAT scan machines and pacemakers. Exempt items include eyeglasses, contact lenses, and hearing aids. The tax is expected to raise approximately $30 billion over the next decade—revenue that will fund the Affordable Care Act. If the MDET is repealed, “other industries will put repeal of their parts of the Affordable Care Act high on the agenda.”

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.