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Roll Call

Health Law Tax Foes Find Hope in Overhaul Effort

Tom Williams/CQ Roll Call File Photo
Camp is among the members of Congress working on a comprehensive tax overhaul.

If hundreds of comments are any indication, everyone has ideas about what a House committee should include in its tax overhaul package.

From Starbucks to the Girl Scouts, a variety of groups and individuals have passed along requests to the 11 bipartisan working groups created by the Ways and Means Committee. And with Democrats controlling the Senate and the White House, the process will need to stay bipartisan if there’s any hope of getting a tax overhaul enacted before the end of the 113th Congress.

But that hasn’t stopped opponents of provisions intended to help pay for the health care law from pushing to include their specific repeal efforts in the tax package. As long as House Republicans are hesitant to send individual revenue bills to the Senate — the thinking is that Democrats could change them to reflect their own policy priorities — broader tax legislation may be a way to get around that.

“I don’t see any tax bills moving through the Ways and Means Committee until we actually do the big tax reform package, so that will be the first vehicle moving,” Louisiana Republican Rep. Charles Boustany Jr., chairman of the Ways and Means Subcommittee on Oversight, said last week. “I think all tax matters will likely be addressed in a big reform package.”

Proponents of doing away with provisions such as the medical-device tax and the annual fee on health insurance companies say they already have bipartisan support for their repeal legislation. But the efforts still will face health care politics and the need for significant offsets, making their inclusion far from certain as lawmakers work toward comprehensive tax legislation that can pass in both chambers.

“While we are from different political parties, we agree that America’s tax code is broken,” Ways and Means Chairman Dave Camp, R-Mich., and Senate Finance Chairman Max Baucus, D-Mont., wrote in The Wall Street Journal this month. “That is why we have been working together as the chairmen of Congress’s two-tax writing committees to make it fairer for families and spark a more prosperous economy.”

Device Tax Debate

Of the various taxes included in the health care law (PL 111-148, PL 111-152), the one that may have the strongest momentum for repeal is the 2.3 percent excise tax on medical devices.

Seventy-nine senators, including 33 Democrats and Maine independent Angus King, voted last month to abolish the tax as an amendment to the nonbinding fiscal 2014 budget resolution (S Con Res 8). Opponents hailed the vote as a sign that bipartisan majorities in both chambers support repealing the provision, and they pushed for Congress to move forward with binding legislation. While the House passed a measure to repeal the tax last year, the Senate never took it up.

Now, representatives of the medical-device industry are asking the Ways and Means panel to fully repeal the provision, which took effect this year, in a comprehensive tax overhaul package.

The Advanced Medical Technology Association called elimination of the tax “a prerequisite for making the code more competitive for our industry” in its submitted comments. And the Medical Device Manufacturers Association said the tax “directly and indiscriminately penalizes one of the world’s leading manufacturing industries.”

Camp already appears ready to include the repeal in the House tax proposal. In an email, Ways and Means spokeswoman Michelle N. Dimarob noted that “everything is on the table and the chairman has said he will absolutely repeal the Medical Device Tax in tax reform.”

But the Senate could be a different story; Baucus and Majority Leader Harry Reid, D-Nev., were among the Democrats voting against the device tax amendment to the budget resolution.

“The Finance Committee is meeting weekly, on a bipartisan basis, to go through numerous options for improving the tax code,” a Finance Democratic aide said in an email. “Nothing is off the table.”

Rep. Erik Paulsen, who has introduced legislation (HR 523) to eliminate the device tax, said he supports getting the provision fully repealed in the quickest way possible, whether it’s through his bill or as a part of a tax package. He called the push to include repeal in a tax overhaul “a strategic calculation,” noting that President Barack Obama and Reid both have shown opposition to doing away with the tax.

“I think tactically and strategically some are thinking ... it may have to be part of a broader tax package,” the Minnesota Republican, whose state is home to a number of device companies, said last week.

Insurance Fee

Another provision that has come under fire from a powerful lobby is the law’s annual fee on health insurance companies, often called the health insurance tax, which is slated to take effect next year.

The health insurance industry is pushing the Ways and Means panel to include its repeal in broader tax legislation, maintaining that the provision “will undermine efforts to control costs and provide affordable coverage options to the American people.”

“Enacting this repeal bill as part of a comprehensive tax reform package will be an important step toward restoring fairness to the tax code and protecting vulnerable populations from a costly and burdensome tax,” America’s Health Insurance Plans wrote in comments the group submitted to the committee.

Boustany is the sponsor of a House bill (HR 763) to get rid of the tax, which he says will be one of the drivers of higher premiums for small-business owners and families. But, as is true with the medical-device tax, repealing the fee would cost a substantial sum.

According to a Congressional Budget Office letter from July, removing the insurance provider fee is estimated to decrease revenue by $102 billion over 10 years. And repealing the medical-device tax is expected to cost $29 billion over the same period.

A broad package could offer more options for offsetting repeal of the health care tax provisions, which may make it a more attractive vehicle than a single bill. At the same time, it’s still a significant chunk of money that the package would have to make up for in other ways.

“Repealing the ObamaCare revenue provisions would simply add another $1 trillion to the tab — one that Republicans could only pay for by raising taxes on lower- and middle-income families,” a House Democratic aide said in an email. “It is a totally irresponsible proposal.”

The politics surrounding the health care law are also undoubtedly in play, although Republican lawmakers maintain that they do not see that preventing some provisions from being addressed in a tax overhaul package. Boustany said he thinks there is “less of an entrenched position by a lot of Democrats now about these Obamacare taxes.” And Paulsen said he has spoken to many Democrats who acknowledge that the law isn’t perfect.

“There’s a big opportunity to get bipartisan support on cleaning up some of those provisions along with tax reform,” he said.

Provisions with a strong lobby behind them also could help lawmakers bring more groups on board with a tax package, which faces considerable challenges. But for opponents of provisions such as the medical-device tax, the focus will remain on searching for any way — inside or outside of a tax overhaul — to get the language off the books.

“Right now it’s all about keeping up the momentum and really getting it over the finish line,” Paulsen said.

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