The Obamacare tax hike no one’s talking about

The Obamacare tax hike no one’s talking about

In at least one way, Mitt Romney was right that healthcare reform in Massachusetts is nothing like the Affordable Care Act. The work disincentives in Obamacare are far worse. There are high implicit taxes linked to its income-based subsidies (to reduce premiums and out-of-pockets costs) for people in households with income in or near the 100-400% range of the federal poverty line. The more that working reduces the net of tax value of available benefits from a particular program, the more that program reduced the reward to working. Shorter: The less you work, the bigger the sliding-scale subsidies.

And here’s how the ACA affects work incentives, according to recent research from University of Chicago economist Casey Mulligan:

The average marginal tax rate hike among all sometime-employed, non-elderly, near-median household heads and spouses – including  in the average those with no hike – is five percentage points.  Five percentage points is large by historical standards. While it lasted, the payroll  tax cut of 2011 was one third of the magnitude of the ACA’s tax rate hike. … In terms of its impact on average marginal tax rates, the ACA hike is  almost double the effect of permanently increasing unemployment benefit payments to 99 weeks from a baseline of 26 weeks.

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