White House threatens veto of Paulsen's bill to repeal medical device tax

WASHINGTON – President Obama's advisers will tell him to veto a law sponsored by Rep. Erik Paulsen, R-Minn., that repeals a sales tax on medical devices.

The White House made the announcement late Monday afternoon. It reaffirms a stance Obama took earlier when the device industry lobbied extensively to kill the levy.

Despite the veto threat, the House is expected to pass the Paulsen bill this week or next and send it to the Senate, where it has strong bipartisan support.

The 2.3 percent tax on device sales helps pay for the 2010 Affordable Care Act that the president made the legislative hallmark of his first term.

"After more than five years under this law, 16.4 million Americans have gained health coverage," the Office of Management and Budget (OMB) said in a news release. "Up to 129 million people who could have otherwise been denied or faced discrimination now have access to coverage. And, health care prices have risen at the slowest rate in nearly 50 years,"

Paulsen's bill threatens that effort by cutting off a $24.5 billion revenue stream over 10 years, the White House said. The bill provides no way to replace the lost revenue.

Calling Paulsen's bill "a large tax break to profitable corporations," the OMB said it "would increase the deficit to finance a permanent and costly tax break for industry without improving the health system or helping middle-class Americans."

In a statement Monday, Paulsen said: "There is a reason why both Republicans and Democrats are in favor of repealing the medical device tax — it's bad policy that's harming innovation and killing jobs, especially for our nation's small businesses."

The device industry is one of several health-related industries that was taxed to help pay for reform. Device makers say the tax has cost jobs and curbed innovation. But opponents of repeal cite studies that show the device industry has increased hiring and upped profits.

Jim Spencer • 1-202-383-6123