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Taxes should be progressive, requiring a higher con

tribution from those most able to bear increased tax burdens.

Revenues should be able to grow fast enough to

keep up with benefit growth. Contributions should come from people of all ages.


Because the Commission's recommended program would benefit everyone—the young and the old, workers and unemployed-all types of taxpayers should be asked to contribute to program costs. Taxes vary in the degree to which they are comprehensive—that is, inclusive of everyone. Specific excise taxes, for example, may not be comprehensive, since they primarily affect those with certain consumption patterns. The income tax, by contrast, is more comprehensive because it includes a wide range of income sources in its base. Using comprehensive revenue sources would help ensure that the scope of revenue sources matches the scope of the benefits—that Americans of all ages contribute to the proposed health and long-term care programs, just as all Americans would benefit from them.

Different taxes distribute the burdens on taxpayers in different ways. Taxes are measured by their "progressivity." The more progressive the tax, the greater the share of income wealthier people must pay compared with those who earn less. By contrast, a "regressive" tax requires a greater share of income from lower-income people. Raising income tax rates for the wealthier, for instance, is highly progressive. On the other hand, imposing a sales tax on an item like food, which would place a greater burden on the poor, is regressive.


The justification for using a progressive tax rests on the premise that people with greater ability to pay should contribute more to government programs.

Possible taxes that could be used to finance the Commission's health and long-term care recommendations are listed in Appendix F. The list is illustrative rather than all-inclusive, and compares the amount of revenue likely to be raised from various sources. It also indicates how well each revenue source meets the Commission's three recommended criteria.


The extent to which revenue sources can be expected to grow over time varies. Costs for the pro

As a practical matter, any revenue package-or revenue option-must include at least one broad

based source: either an increase in the income or payroll tax rate, or the addition of a new source such as a value-added tax.

higher tax rates could cause behavioral changes that would result in smaller increases in revenue yields.

In constructing a revenue option, it may be important to begin with a broad-based source, and supplement it with other sources to enhance progressivity, comprehensiveness, and growth potential. A payroll tax, for instance, is neither very progressive nor fully comprehensive. Other tax sources could be combined with a payroll tax increase, however, to bolster these missing attributes in a final revenue option.

Appendix F illustrates various ways that revenue sources might be combined to finance Commission recommendations. Each option lists several revenue sources—including, in some instances, reductions in other spending areas—that could raise the money needed to finance implementation of the Commission's recommendations—about $70 billion to $75 billion.

Options can be developed by combining various revenue sources. In some instances, however, the combination of several sources could yield more-or less-than the sum of the components. This is particularly true of the income tax options.

Each option satisfies, in varying degrees, the Commission's criteria for judging potential revenue sources: progressivity, capacity for growth over time, and contributions from everyone. Each package also builds around a broad-based tax that raises most of the revenue. Other elements in the package were selected to compensate for shortcomings in the primary revenue source, as judged against the Commission's criteria. The analysis in Appendix F demonstrates how each package would apportion the financing burdens across people with different incomes, ages, family size, and other characteristics.

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The Commission does not endorse a particular option or the elements that comprise the option. Other revenue sources or combinations might reasonably be considered. Rather, the Commission has presented options to illustrate alternative ways to raise the revenues needed for program implementation.

Vote Tallies and Commissioners' Views

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