Obamacare

How ObamaCare Hurts the Poor and Middle Class

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Cato's Micheal Cannon has an important new study out today looking at the effects of ObamaCare across the income scale. What he finds is that low-wage workers would be hit the hardest:

House and Senate Democrats have produced health care legislation whose mandates, subsidies, tax penalties, and health insurance regulations would penalize work and reward Americans who refuse to purchase health insurance. As a result, the legislation could trap many Americans in low-wage jobs and cause even higher health-insurance premiums, government spending, and taxes than are envisioned in the legislation.

Those mandates and subsidies would impose 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. Under the Senate bill, adults starting at $14,560 who earn an additional $560 would see their total income fall by $200 due to higher taxes and reduced subsidies. Under the House bill, families of four starting at $43,670 who earn an additional $1,100 would see their total income fall by $870.

Cannon's complete study can be found here.

Update: Reading through Cannon's study, it's worth remembering that, on the campaign trail, Obama accused Sen. John McCain of offering "a plan that only takes care of the healthy and the wealthy." He also said that McCain's plan "won't help reduce costs; it could actually drive costs up." But as Cannon notes, current reform legislation is also likely to make insurance premiums more expensive:

In addition, middle-income workers could save as much as $8,000 per year by dropping coverage and purchasing health insurance only when sick. Indeed, the legislation effectively removes any penalty on such behavior by forcing insurers to sell health insurance to the uninsured at standard premiums when they fall ill. The legislation would thus encourage "adverse selection"—an unstable situation that would drive insurance premiums, government spending, and taxes even higher.

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  1. Everyone always says that once a government benefit is passed it never goes away. And for this reason Obamacare once passed will never end. But, I really wonder about that. The mandate is so draconian and so stupid and will be so unpopular, I can’t see it surviving. Yeah, the Dems think they can just play defense and filibusterer. But, people are going to go ape shit when they get hit with the mandate. Filibustering will be a lot harder and more unpopular than they think.

    1. *dem Senator holds the floor filibustering for Obamacare*

      *thrown tomatoes rain down upon him/her mercilessly*

      Hey, i can dream right?

    2. The citizens of Massachussets are learning that it’s a lot easier for government to mandate insurance than it is for government to provide all the subsidies required for middle class and poor people to purchase insurance at the inflated rates caused by community rating and insure-all-comers-regardless of health status.

  2. Well, Government stopped caring for the poor and middle class years ago! This is nothing new.

    RT
    http://www.web-privacy.se.tc

  3. “Cato’s … finds is that low-wage workers would be hit the hardest”
    Well he also said “What do you want, Mr. Quaid?” and “You are what you do. A man is defined by his actions, not his memory.” I prefer “Start the reactor. Free Mars…” [Richter appears and shoots Kuato through the head] I am just hoping insurance reform doesn’t get shot in the head too.

  4. Are you serious?

  5. When I first got out of school and got my first real job, I worked my tail off to get noticed and promoted. When my second raise came down, my wife pointed out to me that our children would no longer qualify for reduced lunch. (This was years ago, when I was more liberal.)

    It turned out that the 3% raise was a -1.5% raise when all was said and done.

    1. I should have mentioned that we lost out food stamps as well.

      1. name withheld,”When I first got out of school and got my first real job, I worked my tail off to get noticed and promoted. When my second raise came down, my wife pointed out to me that our children would no longer qualify for reduced lunch.” I think the problem was not the food stamps/reduced lunch issue but the order of your choices. You blame your liberalism for your history. The fact is you should have graduated,worked your tail off, received promotions ,married and THEN had kids. I am all for food stamps and social programs but unless your kids were born at five years of age you failed to plan properly. Your predicament was not subject to your party affiliation but due to your immaturity.

        1. Pregnancies and love happen at unexpected times sometimes.

          I think the real problem here is a failure to appreciate how sad and demoralizing it is to rely on the government for food, instead of sucking it up and making ends meet without going begging to those bastards.

          1. prolefeed the romantic,”Pregnancies and love happen at unexpected times sometimes.” Does not apply in this case because they had five years before that child would require school and he spoke of children. He planned poorly twice (unless they had twins) and it was still their duty to put off further education or attend night school in order to provide for his family. I support food stamps/welfare but I just can’t stand the libertarian bullshit excuse that I only took it because I was a liberal.

  6. They’re coming for the EIC (Earned Income Credit), which will be a disaster for retail at tax time. Get the bailout dollars ready, eh…

  7. This study is an outstandingly dishonest cherry-picking analysis:

    Select small income range ($1100), utilize fixed values in bill (rather than sliding scales) to falsely imply that bill rips off the poor.

    That noted, the point in your update is an actual concern (which is why the mandate, with a significant penalty, is necessary).

    1. The mandate has certainly kept premiums down in Massachusetts…

    2. Crusty Dem:

      Your comment is an outstandingly dishonest cherry-picking analysis. Rather than read the entire study, you respond only to the one or two worst examples plucked from it, pretending that the study doesn’t deal in depth with larger income ranges.

      The results hold over a very broad income range, much more than $1100. Yes, he gave examples of the worst possible points on the graph, but the effective marginal tax rates are raised very high over any earned income from the point where the subsidies start to phase out up to $100K plus in income.

      Granted, a large part of the people facing high marginal tax rates aren’t “ripped off” in the sense that they still are overall subsidized. They just have absolutely no incentive to get ahead, and in some cases are punished for a small raise. In that way, it’s no different from any welfare trap.

    3. His examples are dramatic (what do you expect in the executive summary?), but the point is valid:

      “The House and Senate bills thus violate the universally accepted principle of taxation that marginal tax rates should only apply to income at the margin.”

      If you read the whole paper, he plots marginal tax rates over a continuum of income, and it is bizarre.

  8. Just read this article, seems related:

    http://www.washingtonpost.com/…..02542.html

    Absolute crap. Mass. election officials might take a few weeks to certify special election results. How convenient!

  9. Indeed, the legislation effectively removes any penalty on such behavior

    Well, no. Not all medical events happen slowly enough that you can rush out and buy insurance even under guaranteed issue and no pre-existing conditions: heart attacks, strokes, motor vehicle accidents, and so on.

    It would remove the incentive for people purchase insurance to cover against the risk of slower-happening stuff like cancer, AIDS, and whatnot.

    1. Well if you have a heart attack or stroke or you get a steering wheel implanted in your chest during a wreck, emergency rooms already are required to treat you, regardless of insurance status. And once you’re stable you will be able to get insurance even though you have a pre existing condition.

      1. Well if you have a heart attack or stroke or you get a steering wheel implanted in your chest during a wreck, emergency rooms already are required to treat you, regardless of insurance status. And once you’re stable you will be able to get insurance even though you have a pre existing condition

        But that insurance you get after the fact won’t cover the bills you have from said heart attack/stroke/etc.

        1. Yeah, but they will cover the months of recovery after the incident.
          You’ll only pay a few thousand up front from the initial trauma care.

          Which is still cheaper than paying for comprehensive insurance.

  10. Why write this story? Because writing the story, “How the Current Health Care System hurts the poor and middle-class” would be too long and obvious to everyone.

  11. this post is rediculious. it will trap the poor? give me a break. you are grasping at straws. lol shall we pray for healthcare. lol

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