So what do marginal tax rates have to do with the Bacus
When dealing with system, if you change something "here", it will affect something "there" (and perhaps other "there's" as well) in ways not anticipated. As Veronique de Rugy said:
"How would you like your free health care? With some high taxes on the side, please."
What she is talking about is the perversity in that in order to keep the vast subsidies that will be given poorer families for healthcare, many in those families will decide NOT to work harder for their families - because it will cost them MORE in the short term.
It's almost as if the Democrats are telling people:
"if you work harder, we will penalize you more!"
The Wall Street Journal talks about the effective marginal tax rate increases:
Think about a family of four earning $42,000 in 2016, which is between 150% and 200% of the federal poverty level. CBO says a mid-level "silver" plan will cost about $14,700 in premiums, of which the family will pay $2,600—since the government would pay the other $12,100. If the family breadwinner (or breadwinners, because the subsidies are based on combined gross income) then gets a raise or works overtime and wages rise to $54,000, the subsidy drops to $9,900. That amounts to an implicit 34% tax on each additional dollar of income.
So for every dollar the poor person earns, they only can keep 66 cents - welcome to the world of working for the government! Give with one hand, take away with the other.
Or consider a single worker earning $20,600 and buying an individual "silver" policy with a premium at $5,000. Again according to CBO, if his income rises to $26,500, his subsidy plummets to $2,700 from $4,400 (including a cost-sharing subsidy that goes away). This is a 29% marginal tax; moving to other income levels yields increases in the neighborhood of 20% to 23% for both individuals and families. Jim Capretta, a fellow at the Ethics and Public Policy Center, calculates that when combined with other policies like the Earned Income Tax Credit that also phase out, the effective marginal rate would rise to nearly 70% at twice the poverty level.
Get that? Work for a buck - and end up giving the power / money hungry Democrats 70 cents of it. Well, THAT'S a reward for hard work, ain't it!
The incentives for low-wage workers are especially perverse. The exchanges give them a huge break and then take it away gradually as their income goes up. Usually such phase-outs are used to make sure "the rich" don't benefit from IRS dispensations, but here they will have a giant effect on decisions about whether and how much to work, since each additional hour worked reduces the subsidy.
As CBO noted in a July health brief, "Higher [marginal] tax rates also reduce people's incentive to raise their income in other ways, such as working harder in the hope of winning raises; accepting new positions or responsibilities with higher compensation; or investing in their future earning capacity through education, training or other means." This disincentive effect will be especially hard on workers in the middle of their careers and who may not see the same potential for upward mobility as younger workers, but who could earn more through work and effort.
Instead of wanting to give people a hand up by letting them keep more of what they earn, the Democrats are going to use the "free money" as a perpetual siren song of "see, you don't have to work hard - we'll take care of you; just stay as you are now and let us keeping sending the money to you! After all, government will be responsible for you.
Instead of insisting on bettering yourselves and your families like adults, just be wards of the state.
(H/T: NRO)
