A tax on everything from X-ray machines to oxygen tanks took effect at the beginning of this year — one of about 20 taxes and fees included in President Obama’s health care law — and has emerged as the central battleground in the fight by the law’s opponents to repeal parts of the president’s overhaul.
In a nonbinding test vote last month, the Senate voted 79-20 to repeal the law’s 2.3 percent tax on medical devices, with 32 Democrats joining Republicans in pushing to scrap it.
The device tax is one of several that kicked in this year, along with higher taxes on investment income and an increase in the Medicare payroll tax among households making $250,000 per year. Taxes and restrictions on flexible savings accounts, health savings accounts and health reimbursement arrangements are also starting to bite.
The tax penalty imposed on those who refuse to obtain health coverage will kick in next year, with a minimum penalty for low-income individual taxpayers of $95 in 2014, rising to $325 in 2015 and $695 in 2016. Those with higher incomes will end up paying more because their penalty is based on a percentage of their income — 1 percent in 2014, 2 percent in 2015 and 2.5 percent in 2016 and beyond.
And still looming later this decade is a 40 percent excise tax on high-value “Cadillac” health insurance plans, which will not debut until 2018.
The health care law’s $1 trillion in revenue raisers also includes niche targets, such as a 10 percent assessment on indoor tanning services and the elimination of a loophole that allowed the timber industry to designate sludge from wood processing, known in the industry as “black liquor,” as a type of biofuel that enjoys special tax advantages.
Largely abandoning hopes for a full repeal of the president’s health care law, conservative members of Congress are hoping that support for the Affordable Care Act will wane as the smorgasbord of fees and special assessments hits investors, companies and everyday Americans.
To that aim, Republicans are leaning on showmanship and legislative muscle in their respective chambers. The GOP minority in the Senate has been wheeling around a 7-foot-tall “red tape tower” of paper to show off what they say are the reams of regulations and taxes tied to “Obamacare.”
They also point to prior success in rolling back Mr. Obama’s original design, such as the bipartisan repeal of a provision that would have required businesses to fill out a 1099 tax form every time they paid a vendor $600 or more.
For now, the law’s opponents in Washington are focused on the medical-device tax. As an amendment to the budget plan, the Senate vote to eliminate it last month did not have the force of law — nor did the tax’s opponents have to find a way to pay for its repeal. But the bipartisan vote showed that economic forces in Democrats’ home states held enough sway for some left-leaning senators to send a shot across the bow of Mr. Obama’s signature law.
The Advanced Medical Technology Association said device manufacturers had paid $388,000 under the tax as of March 21, and the industry would like to see lawmakers pass the actual repeal bill introduced by Sens. Orrin G. Hatch, Utah Republican, and Amy Klobuchar, Minnesota Democrat.
A spokeswoman for Sen. John Barrasso, Wyoming Republican, said the budget vote “signifies the unraveling of ‘Obamacare.’”
But Henry J. Aaron, a senior fellow at the Brookings Institution, said the medical-device tax repeal vote hardly amounts to a referendum on overall support for the health care law. Rather, he said, the vote was symbolic of “the power of lobbyists to sway members of Congress regarding a small tax on products that people care about a great deal.”