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What’s up with Elizabeth Warren and the Medical Device Tax?

April 3, 2013 By farnkoff

Part of the money for Obamacare is supposed to come from a tax on medical devices. According to the New York Times, the Senate seems interested in repealing that provision, thus wiping out a dedicated funding source, which I assume will have to be replaced or the overall budget of the program decreased. Elizabeth Warren, who I believe supports the health care reform act that was passed a few years ago, is one of several liberal democrats who voted for repeal of the tax provision in a symbolic vote.

The Times implies that massive amounts spent on lobbying by the medical device industry accounts for much of the bipartisan political support for the tax’s repeal. They also imply that, in Warren’s instance, it might be a case of trying to support Massachusetts industries in a similar way that Scott Brown always voted to support defense spending, even if it was not judged necessary or fiscally prudent. Certainly the TImes could be off-base, and it doesn’t really look like Warren has received all that much in contributions from the medical device industry. Given her aggressiveness toward the financial industry, another big player in Massachusetts (State Street Corp, Fidelity, etc), it’s clear that Warren isn’t the type to be cowed by powerful constituents or lobbyists.

The senator herself has offered that this particular tax is harmful to innovation and research. Of course, even this “high-minded justification” sounds somewhat similar to the “job creators” arguments we hear from virtually every industry, and their GOP advocates, whenever taxation and/or regulation of any kind is discussed. In any event, removing a dedicated funding source has to undermine the health care law to at least to a certain extent. How do people here feel about Warren’s stance? Should the medical device tax be scrapped and another source of funding be found?

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Filed Under: User Tagged With: Elizabeth Warren, medical device tax, obamacare, scott-brown

Comments

  1. Charley on the MTA says

    April 3, 2013 at 11:37 am

    … when running vs. Brown. Pretty simple.

    Feet of clay, etc.

    • mike_cote says

      April 3, 2013 at 12:01 pm

      I think this is a battle that is a no win situation. And I have hope that she will choose her battles wisely.

      In no way do I see this as an indication that she is falling down some slippery slope towards the utterly spineless position of (never to be Senator) DINO Lynch against the ACA.

  2. danfromwaltham says

    April 3, 2013 at 12:09 pm

    Perhaps she is going back to her roots. I’m glad she agrees with Scott Brown on this important issue, we don’t want these companies to move their operations to Ireland or Mexico.

    • mike_cote says

      April 3, 2013 at 12:32 pm

      In 1964, Hillary not only supported Goldwater, but actually did volunteer work for him. She was called a Goldwater Girl. I do declare. Bless her heart.

  3. johnk says

    April 3, 2013 at 12:46 pm

    it seemed to me that this was something that was brought up as a concern with general agreement early on as something that could be altered for revenue generation. Similar with the 1099 paperwork that was brought up and had a general agreement to change.

  4. petr says

    April 3, 2013 at 12:56 pm

    They also imply that, in Warren’s instance, it might be a case of trying to support Massachusetts industries in a similar way that Scott Brown always voted to support defense spending, even if it was not judged necessary or fiscally prudent.

    … with you 100% of the time is you. If you voted for Elizabeth Warren thinking that she would always and forever do exactly and precisely the heroic and the righteous thing, then you are in for a bellyful of disappointment.

  5. kirth says

    April 3, 2013 at 1:16 pm

    I work for a Massachusetts medical-device manufacturer. The place has been just getting by for over ten years, but is now taking off with some very competitive products. The device tax had zero impact on development of those devices or the company.

    • mike-from-norwell says

      April 4, 2013 at 10:06 am

      not quite sure as to your comment “The device tax had zero impact on development of those devices or the company.”

  6. theloquaciousliberal says

    April 3, 2013 at 3:11 pm

    It would bring in an estimated $29 billion in revenue to support Obamacare over the next ten years.

    – The tax does not single out the medical device industry for unfair treatment. The excise tax is one of several new levies on sectors that will gain business due to health reform. The expansion of health coverage will increase the demand for medical devices and could offset the effect of the tax.

    – The tax will not cause manufacturers to shift production overseas. The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt.

    – The tax will have little effect on innovation in the medical device industry. To the contrary, health reform may well spur medical device innovation by promoting more cost-effective ways of delivering care.

    (These arguments stolen word-for-word from:
    http://www.cbpp.org/cms/?fa=view&id=3684)

    • jconway says

      April 3, 2013 at 9:00 pm

      Before I was laid off recently I was a consultant for a firm that primarily dealt with healthcare companies, I even made financial reports detailing their revenue streams, and let me tell you flatly-none of these companies are hurting. She is being parochial in a way Ted Kennedy would have been as well. There was a relatively dovish Senator who never found a Raytheon weapon he didn’t want to fund or a military base he didn’t want to keep open since it meant jobs for MA. She is making the same mistake here, and better to alienate her left flank on this minor issue while she is revving them up on major ones and protect the center from attacks she doesn’t care about the state. Kerry was always susceptible to those attacks Ted wasn’t and Warren is making sure she follows the right predecessor.

    • merrimackguy says

      April 4, 2013 at 9:57 am

      Medical Devices are a huge industry in MA. It’s a good fit for us, we have a high tech manufacturing base, as well as access to a lot of science/engineering higher ed resources, and of course the large medical establishment for field trials, etc.

      As an industry it has a very high multiplier- the jobs within the industry are high paying and they need a lot of supporting companies- precision manufacturing, test equipment, not to mention office space and other support services.

      The big issue is that it is a tax on revenue. If you are an early stage company you may have revenue but no profits, yet you still have to pay the 2.5%. Traditionally, as a country, our laws and tax polices go easy on companies at the start. I don’t know if this would effect where a multinational develops or produces, but it seems that a tax on a company that may be producing a product that improves quality of life and maybe even reduces health care spending (speculative of course) is not the first place to look for revenue.

      So maybe that is Sen. Warren’s thinking on this one.

      • mike-from-norwell says

        April 4, 2013 at 3:02 pm

        Let’s say you’re a company with $12 million in revenue and $10 million in expenses (so a 20% profit just to keep things simple – margins may be higher or lower than that). To be clear, what is proposed isn’t a 2.5% tax on the profit of $2 million, but rather a 2.5% tax on revenue. So in this situation, this company would have profits of $2,000,000 but have a tax of $300,000, cutting into profits by 15%. In addition, let’s say $12 million in revenue and $12 million in expenses so no profit; still pay $300,000 tax.

        That’s not trivial in any sense of the word.

  7. johnk says

    April 3, 2013 at 9:49 pm

    This was hardly a Republican stance, emphasis mine:

    Innovation starts with a creative spark—but that spark turns into a great invention only if the right conditions are in place. Steady financing and a smart, highly skilled team are critical. The government also plays a critical role in speeding – or slowing – the pace of innovation. Three changes in government policy are essential: a more efficient regulatory system at the FDA, repeal of the medical device tax, and an increased national commitment to research and education.

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