Obamacare's Subsidy Dividing Line: Earn Less, Take Home More
In 2010, Ted Frank pointed out the idiocy:
According to the Kaiser Foundation's Health Reform Subsidy Calculator (via IBD), a 62-year-old in a high-cost area earning $46,000 a year without health insurance is entitled to a $7,836 government tax credit. Leaving aside how our strapped government can afford that, here's what's interesting: if the same person makes a mistake and earns an extra $22 in income, he loses the entire $7,836 credit. (The cutoff, according to Kaiser, is between $46,021 and $46,022.)
He notes that the person will have more in take-home pay if they earn $46K instead of $55K.
Yes, you are punished for earning more in the Obamaconomy!
Makes an existing problem worse. I can remember my father grumbling in the early 1950s that his $10 raise meant $1 less in his take-home pay - $11 more taxes.
John A at October 27, 2013 11:11 PM
So, Patrick: can anything shake your apparent support for anything this program does?
Radwaste at October 28, 2013 2:08 AM
This actually doesn't surprise me; government taxes, grants, subsidies, etc. have always worked this way. Earn just a wee bit too much and you lose as you are now in the next bracket.
Obamacare, because of its very nature of being a whole new ball game, will show this kind of problem worse that we have seen before.
Charles at October 28, 2013 7:39 AM
It has been a dirty little secret for years now, that educational grants work this way. Earn just a tad too much, and educational subsidies for your college kid were gone.
A lot of two earner couples didnt figure this out in time. Their take home income with a kid in college would have been a great deal more, if the second earner quit the job that they took to fund the kids college.
Isab at October 28, 2013 2:28 PM
The unions have provided their members charts for years that show at their pay how many hours they can work before they get into the next tax bracket for a pay period and make less money.
But I heard one today that oil pipeline workers hours are going to be cut because they would exceed the insurance amounts and the company contracting them would have to pay more for the "excess" insurance amounts.
Jim P. at October 28, 2013 5:43 PM
None of the posters here has explained accurately the off-topic issue of how marginal income tax rates actually work. I count two of my useful idiots -- so far -- gratuitously repeating urban legends, while another's father confused 1950s estimated withholding rates with actual income taxes. Thanks, guys.
Andre Friedmann at October 28, 2013 6:17 PM
I know exactly how marginal tax rates work , which has absolutely nothing to do with losing a health care subsidy, or access to college grants at a certain adjusted income point.
By the way before you move to that "better job" out of state, check their state tax rates, and what income they apply to. I know a number of people who have moved from a no income tax state to California, and seen a large raise totally eaten up by a combination of bracket creep and additional taxation.
Isab at October 28, 2013 7:23 PM
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