Magazine article Nation's Cities Weekly

Tax on Cities May Finance Federal Long-Term Care Plan

Magazine article Nation's Cities Weekly

Tax on Cities May Finance Federal Long-Term Care Plan

Article excerpt

House and Senate Democratic leaders have introduced similar bills to provide long term health care for elderly and disabled Americans paid in large part through a direct tax on cities and towns. While the legislation, introduced earlier this month, is unlikely to be adopted this year, the proposal to impose a direct tax on the interest on traditional municipal bonds sets a grave precedent for state and local governments.

If enacted, the legislation is projected to cost $45 billion annually. While the Senate version is unclear with regard to financing, the House bill would raise the $45 billion from three sources:

[subsection] a 2.5 percent tax on unearned income (including interest on all state and local tax exempt municipal bonds);

[subsection] a payroll tax of 0.5 percent on employers (including cities and towns) and employees; and

[subsection] a reduction in the amount of estate taxes exempt from deferent taxation.

The Long-term Care and Family Security, HR 4848, was introduced by House Majority Leader Richard Gephardt (D-Mo.) and House Health and Environment Subcommittee Chairman Henry Waxman (D-Calif.) on April 9. Eleven Senate cosponsors, including Senate Majority Leader George Mitchell (D-Maine), Senate Labor and Human Resources Chairman Edward Kennedy (D-Mass.), and Sens. John Rockefeller (D-W.V.), David Pryor (D-Ark.) and Don Reigle (D-Mich.), introduced a similar bill the same day.

The legislation would create a new federal insurance program to provide nursing home care and in-home care for chronically ill and several disabled people of all ages. …

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