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The Tax Cut That Could End the Shutdown


Republicans on the Hill seem to be shifting the shutdown fight away from Obamacare, but one possible ACA-related compromise continues to get play in the media: the repeal of the medical device tax. It’s a part of the law we haven’t written about much here at Via Meadia, because it’s not something the ACA stands or falls on. But in light of its importance to the ongoing negotiations, here’s a quick run down of that tax and the fight against it.

The medical device tax is a 2.3 percent fee on heavy medical equipment like pacemakers (not smaller items like hearing aids) that’s expected to rake in $29 billion dollars in the next decade. The medical device industry opposed it because (they claim) it would destroy jobs by burdening employers with new expenses. The White House was very clearly against repealing the tax despite the fact that several Democrats opposed it from the beginning (Massachusetts and Minnesota, both Democratic states, are homes for a lot of medical device companies).

As the shutdown dragged on, a repeal emerged as both something that the GOP could claim as a victory as well as something that the Democrats could live with. And although the debt limit conversation is now shifting away from Obamacare toward other deals, the industry is still pushing hard for repeal. Its latest strategy has been to enlist the help of the dentist’s lobby to put more pressure on Congress.

The tax’s fate now largely depends on how much the GOP believes a repeal could help them claim victory in the shutdown fight, and whether Obamacare deals are still on the table. Either way, don’t expect a repeal to change Obamacare’s basic effects on the US, for good or ill.

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  • Boritz

    But in light of its importance to the ongoing negotiations…VM

    Importance to the ongoing negotiations?
    Reminds me of an anti-smoking commercial I once saw that focused on how bad cigarettes are for the appearance of your teeth. Actually there is lot more at stake.

  • Matt B

    We needed a government shutdown for this? And in their principled stand for fiscal responsibility against the new entitlement of Obamacare, Republicans are going to remove only a provision that adds revenue?

    • cubanbob

      The sky hasn’t fallen so the real question is who cares how long this “shutdown” continues? For everyone who doesn’t live off other peoples taxes it’s a non-event.

      • wigwag

        It’s not an “non-event” for the GOP; in fact, public disgust with Republicans has reached epic proportions.

        According to a Gallup poll released this week, the Republican Party’s favorability rating has fallen to a record low 38 percent. While the favorability rating for the Democratic Party has also fallen somewhat, at 43 percent, it is way above the dismal GOP rating.

        62 percent of Americans now view the Republican Party unfavorably; by comparison, only 49 percent of Americans feel the same way about the Democrats.

        You can see all the results here,

        As if all of this was not bad enough for Republicans, they are also rapidly losing support amongst the people who matter to them most; their big donors.
        Without these donors, the GOP has no chance of capturing the White House three years from now; none.
        The vast majority of GOP donors are fat cats who make most of their money on Wall Street. Unlike the GOP cadres in the House of Representatives who are shutting the Government down, these GOP fat cats are not revolutionaries. They want the Government open and they want the debt paid.
        Most of these big GOP donors are social liberals and economic conservatives; but they have little to nothing else in common with Tea Party acolytes. They are not populists; in fact they find populism repulsive.
        The GOP firebrands are well along in the process of driving these fat cat donors straight into the arms of the Democrats. Many of them supported Obama in 2008 but migrated to Romney in 2012; it’s a hop, skip and a jump for them to bundle contributions for Democrats instead of Republicans.
        Even more ominous for the GOP is the fact that even its hard right big donors like the Koch brothers are getting annoyed; they just instigated a letter to the Speaker telling him that they don’t support default or the government closure.
        Who cares about the shutdown? Anyone who doesn’t want to see the GOP collapse should care. Anyone who doesn’t want to see the Presidency remain in the hands of the Democrats for a generation should care. Anyone who doesn’t want to see the Democratic Party have license to move forward to the left because they have nothing to fear from a moribund GOP should care.
        As for the Democrats, Harry Reid has it exactly right; they should refuse all compromise. They are winning and they are winning big. The longer this goes on the better off they are and when the GOP finally capitulates and gets next to nothing in return, the Democrats will hardly be able to wipe the smiles off their faces.
        If I was President Obama, I would sit back and let the Republicans commit suicide.
        Make no mistake; that’s exactly what they are doing.

        • Corlyss

          Beg to differ. Disdain for Republicans ain’t nearly as bad as it was in 1995. Polls show a 20 pt. difference between then and now and a lot more anger at the Dems and Dear Leader than was true in 1995. Additionally, the Rep. caucus is a lot more united than it was then when the freshmen Republicans were scared silly that Newt was going to cost them their seats.

          • wigwag

            Corlyss, I am afraid the situation is highly reminiscent of 1995. The NBC-Wall Street Journal on the imbroglio just came out today and the numbers for the GOP are bleak. Here’s what they show:

            1) By a 22-point margin (53 percent to 31 percent), the public blames the Republican Party more for the shutdown than President Barack Obama – a wider margin of blame for the GOP than the party received during the poll during the last shutdown in 1995-96.

            2) Just 24 percent of respondents have a favorable opinion about the GOP, and only 21 percent have a favorable view of the Tea Party, which are both at all-time lows in the history of poll.

            3) With one year until next fall’s midterm elections, American voters prefer a Democratic-controlled Congress to a Republican-controlled one by eight percentage points (47 percent to 39 percent), up from the Democrats’ three-point advantage last month (46 percent to 43 percent).

            4) While the shutdown has wounded the Republican Party, Obama’s overall political standing remains stable in the poll. Forty-seven percent of Americans approve of his job performance, which is actually up two points from last month (though that’s within the survey’s margin of error).

            5) Obama – with a 47 percent favorable, 41 percent unfavorable rating – also is the most popular political figure or institution in the poll, surpassing the Democratic Party (39 percent favorable/40 percent unfavorable); Sen. Ted Cruz, R-Texas (14 percent favorable/28 percent unfavorable); Senate Majority Leader Harry Reid (18 percent favorable/32 percent unfavorable); and House Speaker John Boehner (17 percent favorable/42 percent unfavorable).

            6) 46 percent of respondents say the president, during this budget standoff, has been a strong leader and is standing up for what he believes in, versus 51 percent who believe he’s putting his own political agenda ahead of what’s good for the country. By comparison, a whopping 70 percent say congressional Republicans are putting politics first.

            7) At the bottom of the list are the Tea Party (21 percent favorable/47 percent unfavorable) and the Republican Party (24 percent favorable/53 percent unfavorable) – their lowest favorable numbers in the history of the poll.

            The only reason political parties exist is to win elections. Does the GOP actually care about winning?

            It doesn’t seem like it.

            You can find the poll here,


          • cubanbob

            To cut to the chase, the Republicans polled so bad that they retained both houses of Congress in 96 and pickup up of a couple of senate seats in that election. And Mr. Popularity Bill Clinton barely eked out a majority of the vote in a second three man race against Bob Dole-Mr. Charm incarnate and Ross Perot.
            Clinton was more lucky than good although a win is still a win but had it not been for Perot there would not have been a first Clinton Administration and had it not been for Hillarycare there would have been no Republican take over of the House. And just like Hillarycare cost the Democrats the House in 96 the current version of Hillarycare cost the Democrats the House in 2010 and 2012. The question now is will Hillary-Obamacare cost the democrats the Congress in 2014 and 2016?

          • Corlyss

            Thanks for the great post with stats and cites and everything I love in a post. I’ll follow the story, but I’m not ready to declare conservatives doomed. I certainly get the point about winning elections. Back before 1994 I thought the party had resigned itself to being a cross between Dem-lite and a Sunday Afternoon Debating Society.

          • Corlyss
        • cubanbob

          Oh please. Enough of the melodramas. Jack Lew has the cash on hand and the legal authority to service the debt and he will write the check. If he doesn’t he will be the first Treasury Secretary to default the government and those big fat cats will make sure after he leaves office that he will never work on Wall Street ever again. And Barry can kiss of his cushy retirement income of speeches and boards of directors.

          As for the polls, really? The Democrats had no problem passing ObamaCare despite the polling. Indeed the that lead to the creation of the TEA Party and the loss of the House in 2010. And despite the intimidation of the IRS against the TEA Party and the now apparent voter suppression by the IRS the Republicans still retained the House.

          The Democrats extended the employer mandate by one year so what is this hill they are fighting to death on- a one year extension of the individual mandate? And why is this so important? Could it be they know if both mandates converge and the public gets royally shafted for the most part they are going be swept out of office?

        • Matt B

          Great post Wag. I’m no fat cat, but I’ve voted Republican since 1996, and I’m about to walk away from these imbeciles.

      • Corlyss

        The problem with the non-event is the media is out there making it seem like the biggest thing since Pearl Harbor. In Utah, where feds are reviled unless they are military, the media has hyped the shutdown 24/7. It’s almost as bad as the local media was in DC in 1995. The results? People who never had a good word to say about feds and who couldn’t name a single federal program besides Obamacare and immigration are suddenly clamoring for Mike Lee’s head. Most of that comes from the Dem echo chamber in SLC that didn’t vote for him, but still, it’s disgusting.

        • cubanbob

          A couple of election cycles Evan Thomas of the not dearly departed Newsweek said that the MSM gave the Democrats an automatic 15% plus margin in the opinion pols. That was true then and true now. The longer this lasts the more transparent it is that the emperor has no cloths. As for Mike Lee, he’s a big boy. He knowns that those clamoring for his head were never his supporters to begin with. Let this thing run another ten days and when Jack Lew finds the money to pay the debt service this Democrat fear-mongering circus will fold. As long as the Republican’s don’t go wobbly they have the winning hand.

          • Corlyss

            I hear ya. Thomas was right. But that was then; this is now. We’ll just have to see what happens next year when the real votes are tallied. I’m not buyin’ yet that Republicans have been as badly hurt. A lot has happened since then, esp. the growth of landslide districts a la The Big Sort.[ There are far fewer toss-up districts now. There many more landslide districts now, and Republicans own most of those.

          • cubanbob

            15% is a lot but when seen through the correct filter the Democrats have a huge problem. If Barry is now at 37% with the tailwind it means without it he is at 22% which is lower than Nixon’s on the day Nixon resigned. Apply the same correction factor to the Congress and thinks look a lot different which explains a lot of the hysteria on the part of the Left and their house organs.

          • Corlyss
          • cubanbob

            Faith is aspirational. A good tactic is operational. Boehner and the Republicans should just give up and tell the Democrats go ahead and default. The bond and stock market will go wild and the interest rates on federal and state and muni bonds will increase substantially. Call their bluff and they will fold. Then negotiate a budget, not a continuing resolution. In actuality there won’t be a default so at this point since Obama won’t take a 99% yes for an answer the thing to do is walk away and let them handle the mess. Watch the Democrats come up with a compromise at the 11th hour.

          • Corlyss

            Did you hear about Stephanopolis’ memoirs, where he said the Dems were about to cave in 1996 when the Republicans sued for peace? From him it sound like taunting – “neh neh neh neh neh – made ya blink.”
            When I hear things like the non-negotiator suddenly reneging on his agreement to negotiate, I say to heck with it! Let the craft go over the falls.

          • cubanbob

            It won’t which is why the Republicans should walk away and let the Democrats come running to them. If for the sale of argument the Democrats let the government default the ones worst hit will be those on entitlements and needs based entitlements since no one will buy a bond that doesn’t have a high coupon, a coupon so high the government can’t afford to borrow and pay for-hence big cuts in social spending. And good luck trying to pass massive tax hikes to float social spending.
            And when the markets tank those taxpayers aren’t going to be in a mood to pay higher taxes for state and local pensions.

          • Corlyss

            I’m relying on you’re being right. Unfortunately, with their history, I suspect the Republicans will blink again to avoid things being said about them which will be said anyway.

          • cubanbob

            I was going to bet you $5 but upon reflection the safe bet is that you will be proven right, they will probably cave.

  • Corlyss

    Wow! If they settle for repeal of a tax that was going to be repealed anyway, God help ’em! They deserve a shellacking in 2014 (but most likely won’t get it).

  • Parker O’Brien

    VM should have been a little more descriptive of the tax, it is on gross revenue, not profit. Meaning a startup company with no profit and $100 million in gross revenue, would have to pay $2.3 million in taxes.

  • lukelea

    A tax on medical devices will only achieve its objective if the medical device industry is truly competitive.

  • Kevin

    If the GOP wants a fig leaf to cave on they should do it over the individual mandate (or linking any waiver of employer mandate to also waiving the individual mandate), not the medical device tax.

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