House OKs Health Care Tax Deduction
Thu Jul 25, 2:02 PM ET

WASHINGTON (AP) - A tax deduction to help middle-income people defray the cost of insurance for long-term health care, such as a nursing home, won passage Thursday in the House.

The legislation, approved on a 362-61 vote, would permit the deduction for a taxpayer, a taxpayer's spouse or a dependent and it would apply whether or not the taxpayer itemizes tax deductions. The tax break would reduce federal revenue by about $5.3 billion over 10 years.

Current law permits long-term health insurance premiums to be deducted, but a taxpayer must itemize and the amount that can be deducted must be more than 7.5 percent of income when combined with all other medical expenses.

The new deduction would be limited to individuals earning between $20,000 and $40,000 in adjusted gross income and between $40,000 and $80,000 for married couples filing jointly. In addition, the taxpayer would have to pay at least half of the insurance premiums.

The bill's chief sponsor, Rep. J.D. Hayworth ( news, bio, voting record), R-Ariz., said the deduction would encourage more people to use private insurance to pay for such things as nursing homes and assisted living arrangements instead of relying so much on Medicare and Medicaid.

"If we don't put incentives in for individuals, our public funds will be depleted," Hayworth said.

Despite the overwhelming vote in favor, Rep. Fortney "Pete" Stark, D-Calif., said the measure would help relatively few people at great cost to the government and that it appeared designed to "bail out the insurance industry."

"It's worthless and it's a tremendous waste of the taxpayers' money," Stark said.

The bill also would permit an additional personal tax exemption, worth $3,000 in 2002, for members of a taxpayer's family who function as long-term caregivers and expand the types of expenses drug manufacturers can claim as a tax credit in testing drugs for certain rare diseases.

The legislation heads next to the Senate, where its chances are uncertain. Senate leaders have indicated there will be few tax bills passed before lawmakers adjourn in the fall.


The bill is H.R. 4946.


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