Paulsen touts device tax repeal as proof Congress can work together

WASHINGTON – Flanked by eight other House members from both parties, Rep. Erik Paulsen of Minnesota on Wednesday touted his latest push to kill the medical device tax. He pointed to it as a way to prove to the American public that Congress can work together.

The medical device industry, including hundreds of companies in Minnesota, has spent millions lobbying against the tax, passed in 2010 to help pay for the Affordable Care Act (ACA).

"Members don't have to agree on how to achieve health care reform to find common ground in the need to promote American innovation and protect American manufacturing and research and development jobs," Paulsen said.

Minnesota's newest House member, Republican Rep. Tom Emmer, joined Paulsen at a news conference at the Capitol.

Paulsen's latest device tax repeal bill includes more than 250 House cosponsors. What it doesn't include is an alternative revenue source or new savings to offset the $30 billion the device tax was supposed to contribute to health care reform over the next decade.

An inability to find an offset has doomed past attempts to kill the tax.

Paulsen and Rep. Ron Kind, D-Wis., the principal minority sponsor of device tax repeal, hope committees of the House and Senate can negotiate an offset through savings in health care delivery.

Kind said he supported the ACA because the U.S. was spending twice as much per capita on health care as the rest of the developed world with worse outcomes. But moving forward, Kind said there is a "need for adjustment for what is working and what is not working."

Paulsen said the 2.3 percent federal tax on device sales hurts start-ups and small med-tech businesses because it is based on overall sales and not profits. Most medical device companies in Minnesota are small businesses producing one or two products, he stressed, and most don't make money for 10 years.

Paulsen insisted that a 2014 report from the Congressional Research Service that the tax has not been as devastating to job creation or research spending as the device industry predicted "doesn't match the facts on the ground." He also said the increased utilization of medical devices that was supposed to help device makers absorb the tax was "a myth."

Paulsen has successfully guided device tax repeal bills through the House before, only to have them falter in the Senate. Republicans took control of the Senate in the 2014 elections, improving chances of passage of repeal in that chamber.

In the past, President Obama has threatened to veto device tax repeal because it undermines the ACA, his signature legislation.

Paulsen believes the dynamics have changed.

Device tax repeal was raised as one area of cooperation immediately after the 2014 election, Paulsen said. The White House is "going to look at anything that hits their desk," he said. "I think they realize there are potentially veto-proof majorities on this bill. So they recognize they're going to want to work on this issue."

Jim Spencer • 202-383-6123