Federal excise taxes usually have clear-cut policy objectives. For example, the tobacco tax combats smoking, a habit that kills people and drives up medical costs. The alcohol tax addresses the social ills arising from alcohol abuse and the gasoline tax makes drivers pay for the roads that they use. But what policy objective is served by a tax on pacemakers, hospital beds, MRI systems, and X-ray machines?
That is the question Congress should keep in mind as it decides whether to allow the medical device tax to return on January 1. A welcome New Year’s gift would be for Congress to heed basic tax policy principles and scrap the tax once and for all.
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by alan viard
december 16, 2019