Hidden Effective Marginal Tax Rate in ObamaCare

Those mandates and subsidies would impost effective marginal tax rates on low-wage workers that would average between 53 and 74 percent — and even reach as high as 82 percent — over broad ranges of earned income. By comparison, the wealthiest Americans would face tax rates no higher than 47.9 percent.

Over smaller ranges of earned income, the legislation would impose effective marginal tax rates that exceed 100 percent. Families of four would see effective marginal tax rates as high as 174 percent under the Senate bill and 159 percent under the House bill.

From Michael Cannon at Cato.

Comments (9)

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  1. Tom H. says:

    I think the left wing of the Democratic Party does not understand the concept of marginal tax rate.

  2. Joe S. says:

    This is definitely anti supply side economics.

  3. Linda Gorman says:

    One possible spin: By encouraging the substitution of leisure time for work, ObamaCare will make it possible for low income workers to spend more time with their families.

  4. Bruce says:

    How could I have missed that, Linda? This is a pro-family policy. Of course.

  5. Bart Ingles says:

    That’s one was to reduce unemployment.

  6. Bart Ingles says:

    That’s one way to reduce unemployment.

  7. John R. Graham says:

    Cannon’s study is outstanding. Now, however, we learn that unionized government workers will enjoy lower marginal tax rates on their retiree health benefits than private-sector workers, thanks to yesterday’s news about the bailout of “Cadillac” plans (http://tinyurl.com/yby9sr9). The health “reform” has devolved into an attempt to bail out the unfunded liabilities of state and local government workers’ health liabilities.

  8. America's Young Theologian says:

    Of course, what they said is true…but is of little value. Yes, if you make $1 less than the cutoff of a higher tax bracket, you’ll lose money if you make $2 more. Such is the nature of using brackets. This doesn’t effect that many people. In the case of out of pocket expenditure on health coverage, it’s in terms of % of FPL. With the Senate plan, yes, someone that made 149% FPL and got a raise so that they made 151% FPL would find themselves in a similar situation. This is of little significance for two reasons. 1. This affects very few people. 2. The president’s plan erases the jumps in favor of incremental increases to eliminate this problem.

    This is all smoke and mirrors. Sure you can scare people when you handpick statistical outliers and fail to mention that the example you chose will not likely end up in a signed bill.

    Notice how they just happened to pick “families of four starting at $43,670″…why? Because the FPL for a family of 4 is $22,050, placing this fictional family and just under 2x FPL of $44,100, so that when they make more CATO can sound the alarm bells of how bad this legislation is (because they jumped from a cap of 4% to 6.3% — also the first jump of over 1%). Convenient? It’s downright deceptive.

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