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1 Kyle Pomerleau, The ACA Medical Device Tax: Bad Policy in Need of Repeal 1 (2013)

handle is hein.taxfoundation/ffdgexz0001 and id is 1 raw text is: FONAINFisa                                                    F act
April 9, 2013
No. 364
The ACA Medical Device Tax: Bad Policy
in Need of Repeal
Kyle Pomerleau
On March 21, the Senate voted 79 to 20 to pass a nonbinding budget amendment encouraging the repeal of
the Affordable Care Act's medical device excise tax. This is a 2.3 percent tax on total sales of taxable medical
devices by medical device manufacturers that went into effect on January 1, 2013. Like other excise taxes,
this tax is harmful and will create distortions in the medical device industry, likely leading to higher health
care prices for consumer, lower employment, and less innovation. Additionally, the tax is complex and
creates additional compliance costs for firms. These consequences argue for the permanent repeal of the tax.
The Medical Device Tax
How does this tax work?
The medical device tax operates like a typical excise tax, which increases the per-unit price of a good.
However, unlike common excise taxes such as the flat per-unit taxes on cigarettes and alcohol, this tax is a
percent of the sales price. This 2.3 percent tax is levied on the manufacturer or importer before a taxable
medical device is sent to the wholesaler or hospital.
Purpose of this Tax
Introduced in the Affordable Care Act, the medical device tax is predicted to raise $3.2 billion dollars each
year on average for the next ten years.1 Proponents of the tax have also argued that the tax will act like the
Joint Committee on Taxation, Estimated Revenue Effects of the Amendment in the Nature of a Substitute to H.R. 4872, The
Reconciliation Act of20 0 (Mar. 20, 2010),

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