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The Curious Case of the Year’s First Big Tax Vote

The real vote-a-rama doesn’t start until Friday afternoon, and may well last past midnight. But already the Senate has endorsed one shift in policy with the potential of becoming binding legislation with significant bipartisan support.

The challenge, for the Democrats, is that the language most of them supported Thursday night would do the opposite of the party’s stated approach to fixing the government’s fiscal problems: It would lower taxes on big business, not take away a loophole for corporate America. And it would shoot a decent-sized hole into the underpinnings of Obamacare, not ease or hasten its implementation.

During the first wave of roll calls on amendments to the budget resolution, senators voted 79-20 in favor of repealing the special 2.3 percent sales tax on medical equipment that took effect in January, which was created to raise $29 billion during the next decade to help finance the health insurance overhaul.

All 45 Republicans voted for it, not surprising given their united front against higher taxes and their shared dream of repealing President Barack Obama’s signature legislative achievement. “An important step in the right direction,” Minority Leader Mitch McConnell crowed afterward.

But 34 members of the Democratic caucus also voted to repeal the medical-device tax. That roster included 26 senators who voted to enact the tax as part of the health care law, which will have been on the books for three years as of Saturday, 10 of the 15 Democrats who are on course to seek re-election next year, and both of Majority Leader Harry Reid’s top deputies, Richard J. Durbin and Charles E. Schumer.

The roll call marked a near-total reversal of momentum for the medical equipment manufacturers. There was no similar vote during last year’s campaign season in the Senate, because a repeal bill then had only GOP co-sponsors, and a House bill that would have called off the tax passed with only 20 percent of the Democratic vote. But since the elections there has been an intense lobbying effort to win over Democrats who represent players in the device industry.

The companies’ arguments are that the tax will hobble the growth of their business, prevent them from creating high-paying engineering and manufacturing jobs, give foreign competitors an advantage and is unfair besides — because the sort of equipment being taxed, everything from tongue depressors to artificial knees, is generally for the benefit of Medicare patients, not the younger people for whom the insurance expansion was principally designed.

Those points have helped win over such seemingly unlikely tax-cut backers as the three senators looking most likely to be players in national Democratic politics in 2016, each of whom is also generally an Obama loyalist: Elizabeth Warren of Massachusetts, Kirsten Gillibrand of New York and Amy Klobuchar of Minnesota — where, for instance, 400 different businesses employ 35,000 people making medical devices.

Paradoxically, the broadly bipartisan strength of Thursday night’s test vote may have the effect of stalling actual legislation, because now Reid has clear evidence that allowing a floor vote on a stand-alone bill could start a veto showdown that the president would lose.

More likely, the device-makers will now find themselves in a lobbying war with other businesses over any overhaul of the IRS code, where they will need to pull off the difficult task of convincing Congress to hold them harmless and raise taxes by the equivalent $29 billion on some other players in the health care industry instead.

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