Thursday, October 27, 2011

Spreading the Wealth — But NOT to Families…

The Government Reform Committee released a report this morning in conjunction with their hearing on the distortionary incentives included in Obamacare.  The report also discusses a letter the Committee received from Congress’ non-partisan Joint Committee on Taxation analyzing the impact of Obamacare’s insurance subsidies.  The Joint Tax Committee concluded that under Obamacare, more than 7 million tax filers will have their entire income tax liability eliminated.  This development comes at a time when more than half of all households did not pay income taxes in 2009 – meaning Obamacare will only exacerbate trends that see a dwindling percentage of Americans funding the federal government through income tax payments.

The Joint Tax Committee also found that only 2 million of the 14 million filing units receiving Obamacare insurance subsidies will be joint filers, even though joint filers comprise about 40% of all tax returns.  That disparity is due to the marriage penalty included in Obamacare – the law bases subsidy amounts on the federal poverty level (FPL), but the FPL for two people is less than double that of a single person.  As a result, two individuals filing separately will have a lower income as a percentage of FPL than a married couple, making them more likely to obtain insurance subsidies (or to obtain a richer insurance subsidy).

President Obama has already talked about his desire to spread the wealth around – and on that count, Obamacare certainly succeeds, by ensuring millions more Americans will be excused from paying income taxes.  But there’s apparently a catch involved the President hasn’t advertised – thanks to Obamacare’s perverse incentives, much of the wealth may be spread from married couples who don’t qualify for subsidies into the hands of single people, or cohabiting couples, who do.