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Cantor: Put health care law, device tax on fiscal cliff negotiating table

The House Majority Leader said the device tax, a top priority for Erik Paulsen, should be considered part of the fiscal cliff.

House Republican leaders are now calling for President Obama to put the Affordable Care Act  — “Obamacare,” the legislative highlight of the president’s first term — on the fiscal cliff negotiating table, including, according to Majority Leader Eric Cantor, a provision hiking taxes on medical device companies.

Cantor told Fox News on Monday that the Affordable Care Act, “the largest expansion of government programs we’ve ever seen,” should be subject to the same fiscal cliff negotiations as other areas of the government if lawmakers are to avoid the year-end cocktail of spending cuts and tax increases. Specifically, he said lawmakers should look at the law’s Independent Payment Advisory Board and averting a tax increase on the medical device industry.

The law’s device tax has long been a target of Minnesota Rep. Erik Paulsen, who wants to prevent the 2.3 percent tax increase (and the corresponding industry layoffs associated with it) before it takes effect at the end of the year.

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Some Republicans, including Paulsen, have argued that the device tax increase should be considered a component of the “fiscal cliff” because it’s scheduled to kick in at the same time as a slate of other tax increases, including an across-the-board increase in marginal rates on all earners. But, as Slate’s Dave Weigel notes, stopping the device tax would actually cost the government money, so it wouldn’t make much sense to prevent the tax hike as a part of package to reduce the federal deficit.

If lawmakers are ostensibly working to forge a deficit reduction package while also cutting taxes they say would hurt the economy, they’ll have to find a way to pay for ending a new revenue stream like the device tax. Over the summer, the House passed a bill to do just that, limiting the amount of federal health insurance subsidies beneficiaries receive under the ACA.

Most House Democrats bristled at the change and largely voted against it, and the White House opposed the bill. But every member of the Minnesota House delegation backed it, and a handful of Senate Democrats, including both Minnesota senators and incoming Massachusetts Sen. Elizabeth Warren, have said they want to work to end or delay the tax increase.

Never mind repealing the ACA as a whole; that’s not happening, fiscal cliff or not. But lawmakers like Paulsen are hopeful the device tax could be a part of a final fiscal cliff solution, though congressional scholars and the device industry itself told the Star Tribune last week that there are barriers to that:

The tax’s supporters say the health care law will create an expanded market for medical devices that will help device makers offset the cost of the new tax.

Also, Congress has already compromised by cutting the device tax in half since its passage. Asking to shift the entire revenue burden to somebody else makes the medical-device industry “really look like a special interest saying, ‘Do this to everyone else, but not to us,'” said [Norm] Ornstein, an expert in congressional matters.

Finding an alternative source of revenue in the face of a spiraling national debt makes repealing the device tax more difficult, Wahlstrom was told by some legislators.

“We talked a lot about how the offset would be determined,” he said. No consensus exists.

 Devin Henry can be reached at