Medical Device Tax Suspended for Two Years

Posted December 21, 2015

President Barak Obama signed a nearly $2 trillion spending package into law on Friday that included provisions to suspend the sales tax on medical devices through 2017. The suspension of the 2.3% tax was part of a larger spending bill that will fund the government through September 2016.

When the tax was proposed, lawmakers estimated it would help raise approximately $30 billion over 10 years to help pay for the Affordable Care Act. Since then, the tax has been criticized for raising less money than expected. After going into effect in 2013, it raised $913 million during the first half of that year—about 75% of what was anticipated. Still, the Joint Committee on Taxation has estimated that the two-year suspension will cost the federal government $3.4 billion during 2016 and 2017.

Before adjourning for the holiday recess, the House of Representatives voted 318-109 in favor of the bill, with the Senate approving it 65-33 during a rare Friday vote. The suspension was welcomed by the medical device industry, as groups such as the Advanced Medical Technology Association, the Medical Imaging & Technology Alliance, and the Medical Device Manufacturers Association (MDMA) have opposed the tax for years. They have argued that the tax has come at the expense of research and development, although other interest groups have said that the device industry has exaggerated the impact of the tax.

“MDMA has fought against this misguided policy since it was first proposed in 2009, and while suspension of the medical device tax is a positive step, we will remain focused on repealing a policy that only serves to punish a vital sector of America’s innovation ecosystem,” said MDMA Chairman Scott Huennekens, president and CEO of Verb Surgical, in a press release.

Under the measure, the medical device sales tax would go back into effect Dec. 31, 2017. Whether it is repealed depends in large part on the next president.