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Home," Journal of Health Economics 8 (2) (June 1989): 209-31; John Nyman, “Analysis of Nursing Home Use and Bed Supply: Wisconsin, 1983," Health Services Research 24 (4) (October 1989): 511-37; and, William Scanlon, "A Theory of the Nursing Home Market," Inquiry 17 (1) (Spring 1980): 25-41.

12. For a more detailed discussion of the literature on induced demand for long-term care see, The

resa Fama and David L. Kennell, "Should We Worry About Induced Demand for Long-Term Care Services?" Generations XIV (2) (Spring 1990): 37-41.

13. Chiswick, "Demand for Nursing Home Care"; Nyman, "Nursing Home Use: Wisconsin"; and, Scanlon, "Nursing Home Market."

14. Estimates prepared by Pepper Commission staff.

Appendix F

Revenue Options

This appendix illustrates in several ways the many combinations of revenue sources possible to finance the Commission recommendations.1 First, Table F-1 lists potential revenue sources, the amounts of revenues that could be raised from each source, once fully phased in, and how well each source meets the criteria established by the Commission. These criteria specify that any revenue package must be progressive, must require contributions from all citizens, and must grow at a rate sufficient to support growth in the recommended benefits.

Since a financing package may be composed of taxes from several sources, Table F-2 offers six options to illustrate the range of effects on taxpayers. Each option is large enough to support the Commission recommendations once fully phased in; in practice, its components could also be phased in, since all of the revenues will not be needed at once. Each option also draws upon at least one major revenue source, such as the income tax or the payroll tax, with other smaller revenue sources designed to help meet the criteria for an acceptable overall package. Two of the options assume that part of the revenues could be obtained from a realignment of current budget priorities-drawing upon reductions in other federal spending. These optional packages illustrate that it is possible to raise the necessary revenue from many different combinations of sources.

To help clarify the impact of these various options, several pieces of information are presented. Figures

F-1 through F-6 present tables and graphs to illustrate how each would affect taxpayers in different income groups. The distributional tables and the estimates of total revenue were provided to the Commission by Price Waterhouse. The goal was to conform as closely as possible to specifications for such estimates by the Joint Committee on Internal Revenue Taxation. Some of the revenue sources, which cannot readily be distributed across taxpayers, are not included in the tables.

Finally, Exhibit 1 shows the increase in tax liabilities from the options that would arise for eight prototypical households. These are not necessarily representative households, but were chosen to highlight impacts on a broad range of different types of taxpayers. The descriptions of the households note the assumptions necessary to estimate tax liabilities from the various sources.

Together, these materials underscore that there are many possible combinations of revenue sources that could achieve the goals of the Commission. The Commission does not endorse any particular option or the particular elements of any option shown here. Other revenue sources or combinations that are not included might reasonably be considered. The objective in presenting options is simply to illustrate alternative approaches to raising the revenues needed to put the Commission recommendations into effect.

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Table F-1 Description and Impact of Revenue Sources-Continued

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