Obamacare raises taxes on the middle class? Who knew?
We were all privy to the number of times Obama told Americans on the campaign trail that he would not be raising taxes for anyone make less than $250,000 and that he was going to give a tax cut to 95% of working families even though we all know that at least 40% of Americans do not pay taxes (and never mind that he also said that after he cut taxes and raised spending there would be a “net spending cut” whatever that means). This promise went up in flames when he signed into law a .60 tax on tobacco. Cap and tax is on the shelf now, but by the Treasury Department’s own estimate (yes Obama’s own Treasury Department) if enacted it would raise the average family’s energy bill by $1,700. Now comes word that Obamacare would raise the marginal tax rates on middle class. According to the Wall Street Journal:
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.
In essence, if a person wants to get ahead he would be disincentivized from doing so because he would give up a major benefit for a slight increase in wages. We are used to hearing liberals tell us that people don’t respond to incentives and that taxes don’t matter. However, this is not the case in reality and we will definitely see many more people attempt to stay in a lower tax bracket to get a perceived monetary benefit in Obamacare. Indeed, as the Wall Street Journal continues:
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.
Implicit in the above paragraph is that government programs do NOT help people escape poverty; it keeps them in poverty. Government handouts to people who did not earn it does not incentivize people to work hard and get ahead. If anyone would benefit from Obamacare not passing it is the working poor.