A "death tax" on working people

Apr 19, 2004

Michigan Governor Jennifer Granholm has found yet another way to cut the state's budget deficit. Her latest proposal is to tax the heirs of elderly people who receive Medicaid to pay for nursing home care.

In fact, Granholm is simply implementing a federal law passed in 1993 under President Bill Clinton that allows the states to take back some of the costs of nursing home care from recipients' heirs after they die. Michigan is one of two states – along with Georgia – which had yet to do so.

This is nothing but a mean-spirited attack on working people. It's an inheritance tax directly aimed at working families.

Who are the elderly who receive Medicaid assistance to pay for nursing home care? People who have exhausted all of their savings. In other words, poor and working people. Wealthy people don't qualify for Medicaid, because patients have to "spend down" their assets to about $2,000 to do so. Moreover, they use medical facilities that are much better than the ones Medicaid pays for.

Legally, people who enter nursing homes are allowed to hold onto a home and a car and still receive Medicaid. Before 1993, they could leave a little something to their family members after they died. The 1993 law allows the states to tax this inheritance, including life insurance benefits, and the sale price on the home to cover the costs of nursing home care.

This comes at the same time that the politicians are repealing inheritance taxes to benefit the wealthy. The federal inheritance tax was fully repealed through the year 2010 as part of Bush's 2001 tax cuts. The politicians are still trying to get this repeal extended beyond 2010 as well as to repeal state inheritance taxes.

The Republicans like to refer to the inheritance tax as a "death tax." Taxing heirs of nursing home care recipients is truly a death tax. With the costs of nursing home care not controlled in any manner, in most cases it is a one hundred per cent tax, and for something that society should pay for – the care of its sickest elderly people who are unable to care for themselves.