Obamacare’s ‘Cool Calculator,’ Part 1: Work Disincentives Like We’ve Never Seen Before
For many Americans, an extra dollar in income means thousands more in Obamacare payments.
Related: ‘Affordable’ Care Act Raises One Man’s Premium by $632 A Month
Since June 2012, thanks to Chief Justice John Roberts and his Supreme Court majority, the penalties the law will impose on individuals and families who do not purchase health insurance beginning next year are legally considered “taxes.” In the same convoluted sense that what most of us have been calling “premium subsidies” in Obamacare should really be considered “tax credits,” the premiums themselves should be considered “taxes.”
Hannigan’s email proudly points readers to a “cool calculator from the nonpartisan Kaiser Family Foundation that shows how the tax credits work,” and encourages everyone to “share it on Facebook or Twitter.”
Obamacare opponents should take Hannigan up on her suggestion: embed the calculator on your sites, and encourage everyone who opposes the law’s implementation and supports its defunding to take it for a test drive. Then, demand that the law’s defenders in Washington — as well as those who claim to oppose it but can’t find the courage to support its defunding — explain how they can permit the perverse results the calculator demonstrates to take effect.
You see, Kaiser’s “cool calculator” makes the exact points Robert Rector at the Heritage Foundation and yours truly have been arguing since early 2010 — namely, that the Affordable Care Act will deeply discourage work and virtually any other attempt at financial improvement. It will also throw new obstacles in the way of couples wishing to get and stay married, even to the point of encouraging marital breakups of families with children.
Millions of Americans who do not have employer-provided or other group health insurance arrangements and who don’t purchase private non-Obamacare individual or family coverage before the end of 2013 — something most people don’t realize remains an alternative for just a few more months — will be legally required to enroll in the Affordable Care Act’s health insurance exchanges or to face the penalties now characterized as “taxes.” The number of Americans forced to resort to the exchanges has (per my opinion) been artificially and deliberately juiced by the Obama administration’s illegal decision to delay the imposition of the “employer mandate” until 2015. Many individuals and families who would have qualified for employer-provided coverage if the employer mandate had been enforced in January 2014 will now have to go to the exchanges or face the penalties.
Those who enroll in Obamacare’s exchanges will be subjected to a brand new system of income-based federal taxation (again, their word) over and above Uncle Sam’s existing income and FICA (Social Security and Medicare) tax regimes. This will include marginal rates for most enrollees ranging from 9.5 percent to 18 percent, along with myriad “cliffs” where premiums — er, taxes — skyrocket when a person or couple earns just one dollar of additional income.
Let’s look at a rate table for a single person with no children under Obamacare’s “Silver” Plan at selected ages (a more complete set of tables is here):
Income right at the poverty line triggers exchange enrollment and an immediate $230 premium. The premiums increase by $1 for each $50 of additional annual earnings up to $15,281. At the next dollar, the premium jumps from $306 (2 percent of $15,281) to $458 — a $152 tax on $1 of earnings. (Believe me, we’re just warming up with examples of “cliff” taxation.)
The next level is also intriguing, given that Obamacare is supposedly a masterpiece of “progressive” thought. The average marginal rate on earnings between $15,282 and $34,369 is 14.7%. As the footnote above explains (fully illustrated here), “marginal rates vary between 11% and 18% (rounded), and gradually increase as income increases.” But from $34,370 to $45,960 in income, as seen above, the marginal rate drops to 9.5 percent.
Thus, the “tax credits” OFA’s Hannigan thinks are “cool” are regressive, taking a higher percentage of additional earnings from lower-income working class people and a lower percentage from those with mid-range earnings.
Then look at what happens once a single person who is 50 or older hits annual earnings of $45,961. At that point, what remains of those wonderful “tax credits” goes up in smoke. (Speaking of smoke, you won’t believe how steep Obamacare’s tobacco surcharges are. But I digress.) For a 50 year-old single person, dollar number 45,961 causes their annual exchange premium (i.e., “tax”) to increase from $4,366 to $5,390. That’s because what Kaiser calls Obamacare’s “government tax credit subsidy” (they’re also having a hard time with the language) goes from $1,024 to zero. For a 64 year old, a “tax credit subsidy” of $4,688 gets zeroed out. The marginal tax rate on dollar number 45,961 for that person is a whopping 468,800%.
Obamacare’s ‘Cool Calculator,’ Part 2: The ‘Wedding Tax’
Better off divorced and shacking up.
September 25, 2013 - 12:20 am
In a September 13 email, Erin Hannigan of Organizing for Action’s “Truth Team” bragged about a “cool calculator from the nonpartisan Kaiser Family Foundation” showing how Obamacare’s “tax credits” work, and encouraged everyone to “share it on Facebook or Twitter.”
Obamacare’s opponents, especially those who advocate defunding it before it goes live, need to follow Hannigan’s suggestion, and even embed it on their websites and blogs. That’s because what Kaiser’s “cool calculator” really does is expose the statist health care regime’s three ugliest financial elements.
I covered two of them in my previous PJM column. The first is that, when combined with Uncle Sam’s current income and payroll tax regimes, the gradual expiration as income increases of Obamacare’s “tax credits” — which Kaiser’s model schizophrenically describes as “government tax credit subsidies” — will raise the portion of income taken by the government for each additional dollar of earnings to between one-third and one-half, effectively taxing most American workers at marginal rates usually limited to the planet’s highest income earners. The second is that its subsidy “cliffs” will cause middle-aged single people and married couples making as little as $45,960 and $62,040, respectively, to lose over $10,000 in subsidies — or “tax credits,” in the preferred language of OFA and the U.S. Supreme Court’s — when they earn just one additional dollar. These bugs, which jubilant “progressives” as seen above apparently believe are features, will crush incentives to work and to otherwise pursue financial self-improvement.
The third tragic outcome of Obamacare is what it will do to marriages and families. In January 2010, two months before Obamacare’s passage, the estimable Robert Rector at the Heritage Foundation gave the impact a name: the “wedding tax.”
To illustrate, let’s start with the 60-year-old married couple with no children whose situation I illustrated at the end of Part 1:
What can this couple do? Well, they could decide to earn a few thousand dollars less, which will negate the five-figure premium hit. Encouraging ordinarily willing workers to put in less effort isn’t good in any economy, but especially not this one. But if either spouse’s earnings are unpredictable or hard to precisely track, they could still “mess up” and get socked with a premium they can’t afford.
The “easiest” solution would be to avoid the “wedding tax” entirely by getting divorced while still living together. Here’s what would happen if they make that choice:
But the grandkids will also face the prospect of seeing their moms and dads divorce because of Obamacare.
Let’s look at the situation of a 40-year-old couple with two children. The spouses’ annual earnings are $70,000 and $23,000, respectively:
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