Proposed Offset for Medical Device Tax Can’t Offset Anything — It’s a Timing Gimmick

[Bill USA]

http://www.offthechartsblog.org/proposed-offset-for-medical-device-tax-cant-offset-anything-its-a-timing-gimmick/

House Republicans have demanded, as part of their price for allowing the government to reopen, that policymakers repeal health reform’s medical device tax, which will help pay for extending coverage to millions of uninsured Americans. Although the Senate rejected that House proposal this weekend, some policymakers are reportedly trying to revive it and to replace the lost revenues through use of a revenue gimmick: changing the rules about how much companies must contribute to their employees’ pension funds. This maneuver would bring in more revenue within the ten-year budget “window” — but lose significant revenue after that.

This proposal is unwise for two basic reasons. First, as Tom Friedman in the New York Times and Dana Milbank in the Washington Post both wrote yesterday (and CBPP president Robert Greenstein wrote in an October 1 blog), giving concessions in return for avoiding or ending a government shutdown — or avoiding a default — will only make shutdown (and default) threats by congressional minorities, in order to extract policy changes they can’t otherwise win, a regular feature of the political landscape. That would threaten the functioning of our political system and potentially our democracy, itself.

Second, this proposed change in pension funding rules can’t “pay for” anything. While it would raise money at first, it would lose money in later years. Although it would offset some or all of the cost of ending the medical device tax for several years, it would swell deficits and debt for some years after that.

Federal rules set the minimum amount that employers must contribute to company pension plans, in order to keep the plans solvent. The proposal would allow employers to “smooth out” these contributions over time. Under the smoothing formula, employers would contribute less in the short and medium term, and more in the longer term. These contributions are tax-deductible, so shrinking them would raise employers’ income tax payments — and thus overall federal tax revenues — in the years immediately ahead.
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[Tx4obama]

1. If the medical device tax is eliminated it would add 30 Billion to the deficit. n/t

[Niceguy1]

3. wow, so it

Adds 30 billion to the cost of care....yikes!

[JEFF9K]

2. I think we should reframe the discussion on GOP tax cuts.

Let's call them "Treasury killers." Or maybe "deficit increasers."