Sunday, January 6, 2013

Taxing the Flu [Updated]

    While the nation's attention was focused on the approaching holidays and the (indulge my use of the word one more time) looming fiscal cliff, some in Congress seized upon the distractions to try to make sure when it came to money being spent to battle the growing flu epidemic, Uncle Sam got his fair share.  In the past few weeks, bills were introduced in both houses of Congress to make sure seasonal flu vaccines are subject to a 75¢ per dose tax imposed by Section 4131 of the IRS code. [See update below: the tax funds the National Vaccine Injury Compensation Program.]

    The bill (H.R. 6687) was introduced in the House of Representatives by Republican Jim Gerlach with Democrat Richard Neal co-sponsoring.  The purpose of the amendment is stated in its rather unwieldy title: "To amend the Internal Revenue Code of 1986 to include vaccines against seasonal influenza within the definition of taxable vaccines." According to govtrack.us, the bill died in committee when the 112th Congress came to a close at the end of the year.

    However, an identical bill (S. 3716) was introduced in the current session of the Senate on January 2, 2013 by Democrat Max Baucus and co-sponsor Republican Orrin Hatch.  The bill was passed immediately by unanimous consent and passed on to the House.  Presumably the dead House bill 6687 will now be resurrected in the 113th Congress for action, though this has not yet occurred.

    The text of the bill is quite short and technical and provides no explanation of the underlying reason for the change [see UPDATE below.] The relevant portion of the proposed legislation simply states:
(a) In General- Subparagraph (N) of section 4132(a)(1) of the Internal Revenue Code of 1986 is amended by inserting `or any other vaccine against seasonal influenza' before the period. 
    Section (b) of the bill relates only to the effective date of the legislation.  Section 4132(a)(1)(N) as revised would read in full: "(N) Any trivalent vaccine against influenza or any other vaccine against seasonal influenza."  But Section 4132 deals only with the definitions of the vaccines that are subject to the provisions in Section 4131.  This section reads as follows:
§ 4131. Imposition of tax
(a) General rule
There is hereby imposed a tax on any taxable vaccine sold by the manufacturer, producer, or importer thereof.
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) shall be 75 cents per dose of any taxable vaccine.
    The last two words are the key to the proposed change: "taxable vaccine."  Due to the lack of explanation accompanying the bill, I am only speculating.  But as drug companies struggle to keep up with new and mutating strains of the influenza virus, this bill widens the definition of "taxable vaccine" to make certain that any and all attempts to fight present and future iterations of the flu are subject to the 75¢ per dose tax.  Given that the Centers for Disease Control projects that 135 million doses of flu vaccine will be used this year, Congress is protecting the government's $100,000,000+ take on flu vaccines alone.

    ABC News is reporting that the flu has reached epidemic proportions in 18 states already this year, and the flu season is still young.  The American public may despise the gridlock in Washington, but if this bill is an example of how bipartisanship works, gridlock might gain popularity.  This bill may simply be an attempt to provide uniformity in the IRS code, but the timing of this "flu tax" is certain to provoke charges that Congress is exploiting a national health crisis, charges that an unpopular Congress may find difficult to refute.

UPDATE: Upon further research, I found that that 75¢ tax per dose is intended to fund the Vaccine Injury Compensation Trust Fund.  The fund is explained at the Health Resources and Services Administration website:
On October 1, 1988, the National Childhood Vaccine Injury Act of 1986 (Public Law 99-660) created the National Vaccine Injury Compensation Program (VICP). The VICP was established to ensure an adequate supply of vaccines, stabilize vaccine costs, and establish and maintain an accessible and efficient forum for individuals found to be injured by certain vaccines. The VICP is a no-fault alternative to the traditional tort system for resolving vaccine injury claims that provides compensation to people found to be injured by certain vaccines. The U. S. Court of Federal Claims decides who will be paid. Three Federal government offices have a role in the VICP:
the U.S. Department of Health and Human Services (HHS);
the U.S. Department of Justice (DOJ); and
the U.S. Court of Federal Claims (the Court).
The VICP is located in the HHS, Health Resources and Services Administration, Healthcare Systems Bureau, Division of Vaccine Injury Compensation.
    Although the taxes raised by the vaccine tax go into a "trust fund," this trust fund, like most government trust funds, is on paper only.  According to the most recent report on the fund, November 2012, the balance in the fund is nearly $3.5 billion.  (Since the program's inception in 1988, the fund has paid out only $2.5 billion in 25 years for cases involving all vaccines, not just the flu vaccine.  The balance in the fund could conceivably last another 25 years with no further tax revenue.)   The $3.5 billion balance, of course, is "invested" in "US Treasury Securities."  In other words, financing a portion of the $16.5 trillion national debt.


  1. where does it say that the govt is "mandating everyone get a flu shot"?

  2. It would not be a surprise if, on the heels of this season's epidemic, there will be a push to incorporate the flu shot as a required childhood vaccine for young children, as they are a high-risk group.