Inkwell
Keeping the Poor in Poverty
by Nicole Kurokawa
January 14, 2010, 11:49am
The Cato Institute's Michael Cannon points out one of the unintended consequences of health care reform legislation: how low-wage workers will be hit with astronomical taxes (you know, the same people the government claims it will be helping) and discouraged from moving up the economic ladder.
In a new study, I found those implicit marginal tax rates would hover near 70-80 percent over broad ranges of income. In many cases, they would exceed 100 percent, financially penalizing those who try to climb the economic ladder.
The legislation would cause taxes and health insurance premiums to climb higher still, by creating huge financial incentives for healthy people to drop out of the market. ...
Each bill would require low- and middle-income Americans to pay an increasing percentage of their income toward health insurance. In so doing, the bills dispense with the heretofore universally accepted principle that marginal tax rates should only apply to income at the margin. As a result, the "mandate tax" creates marginal rates as high as 53 percent - and that's for people making just $15,000 per year.
The second feature is the health insurance subsidies tied to the individual mandate. Those subsidies would disappear as income rises. Under the House bill, families of four with an annual income around $43,000 can lose a $1,000 subsidy just by earning $1 over the eligibility cutoff.
The non-partisan Congressional Budget Office writes, "That effect, known as an 'implicit tax,' can lead people to work fewer hours than they otherwise would, in the same way that income and payroll tax rates do." It may also discourage them from "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."
Cannon's full study is available here, and worth a read. Health care reform that not only costs more but that creates disincentives for Americans to work hard - way to get the nation back on track, Congress.
3 Comments
Rockerbabe | January 20, 2010, 4:46pm | #
Another circular argument for not doing anything to help citizens who already have no access to medical insurance. You just want to keep them out of the system by arugmenting against any program to help them. You argue against employer mandates, you argue against basic reforms to provide protection for those who have medical insurance, but have difficulty in relying on their promise to pay for covered services.
I think you must have stock in these companies. This is just another immoral and unjust argument to deny 20% of the population reliable, affordable care.
The "implicit tax" is already in place; it is the extra 5% we pay in premiums to cover the uninsured so at least ER services are covered; but treatment for chronic or castrophatic injury is not covered. Public hospitals used to be the norm in every community and they offered a refuge of sorts for the uninsured; they really don't exist anymore.
Maybe, the "implicit tax" could be done away with, if employers would pay a living wage to employees, instead of working them to death and offering little in return. Employers who do not offer benefits are really not interested in keeping, training or promoting employees. They just want the warm body to cover a task or set of task; little else is required.
Shame on you for arguing against that which you probably already have.
Al Barrs | January 23, 2010, 1:48pm | #
Why would the poor, indigent and non-citizens, working or not, want to loose their now free medical care through hospital emergency rooms? They pay nothing now. Supporting Obama's healthcare package would end free healthcare for the poor, indigent and illegal foreign migrants. Let's get real!
Nestor | January 24, 2010, 10:20pm | #
RockerBabe, well if your concern is about the extra 5% premium for to cover the uninsured, how about just sending them the bill for their medical care? If they don't pay it, just garnish their wages, say 5% until the bill is paid off!
And so if these uninsured go to the ER now, what makes you think they will not go to the ER after they have "free" health insurance?