Paulsen Taking Another Swing At the Medical Device Tax

Rep. Erik Paulsen (R-Minn.) is taking another swing at repealing the medical device tax.

Repealing the 2.3 percent tax – which affects X-ray machines, MRI equipment, and other medical devices that large medical institutions purchase – has been Paulsen’s goal since at least 2010, when he introduced the earliest version of his repeal plan. In 2013, Paulsen and his Republican allies finally passed a moratorium on the tax that went into effect in December 2015.

The tax is scheduled to go back into effect in 2020. But an upcoming House vote could permanently kill the tax, which would lead to an estimated budget shortfall of around $20 billion over 10 years.

Paulsen suggests that the tax is killing innovation. “We’ve got a lot of little companies that want to become the next Medtronic or Boston Scientific, so, yeah, I’m sure it’s something we’ll be talking about in terms of getting something done in an atmosphere where it’s tougher to get stuff done,” Paulsen told The Hill last weekend.

But in 2014, the Brookings Institute reported that it was “unclear what impact the medical device tax will have on investment in early stage innovation.” Venture capital investment in medical devices in 2013 was lower than it had been the year prior, but declining early-stage investment was even then a trend that stretched back at least six years.

As for established medical device companies, there’s no evidence that the tax harmed them, despite protests to the contrary from medical device manufacturers, Republicans, and even some Democrats. In a 2014 survey of executives in the medical device industry, most reported that they made no significant business changes in response to the tax. And a 2015 report published by Consumers Union found “no evidence based on available information that the industry has been disproportionately harmed or has experienced massive layoffs as a result of the medical device tax.”

The House is planning to vote this month on a bill that would repeal the tax. With 269 co-sponsors, including 43 Democrats, the bill looks likely to pass.

While the moratorium on the medical device tax will further swell the national debt, Paulsen’s 3rd Congressional District is broadly supportive of the effort to repeal it. If Paulsen is successful in finally killing the tax, it could bolster his reelection prospects in the fall.

And Paulsen will need all the help he can get. The Cook Political Report says Paulsen’s race against Democratic-Farmer-Labor candidate Dean Phillips is a tossup.


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