ObamaCare Taxes Poor

ObamaCare Taxes the Poor at 100%

The costs of ObamaCare were to be paid by reductions to Medicare ($500 billion) and taxes on those with high incomes and investments ($500 billion).  However, the actuarial and economic analyses don’t take into account the ultimate 100% tax on one’s income – the loss of your job.  

 One does not need to be an economist to understand that mandates will increase premiums and added taxes and penalties on businesses will mean fewer jobs. Employers face a $2000 per employee penalty for each worker not covered.  This hits hardest small employers who are the job creators.  Employers now have a financial incentive to shift from workers to more automation, part-timers, contract staffing, and more overseas outsourcing.  According to the Heritage Foundation, "up to 382,000 low wage unskilled workers are likely to lose their jobs."  Heritage goes on to say that the bill puts "5.2 million workers at risk of unem­ployment, working fewer hours, and providing fewer job opportunities."

 The Obama Administration’s Chief Actuary in the Department of Health & Human Services now tells us that ObamaCare will cost much more than Congress thought when it voted for the bill.  Instead of saving $114 Billion from 2010 to 2019 (as stated by the economists at the Congressional Budget Office - CBO), the Administration’s own cost analysis (only a month since the legislation passed) now shows a debt increase of $311 Billion.   A $425 Billion dollar cost increase in just one month! As government and regulations grow, individuals become less important, and jobs become scarcer.

 According to a chart below from the Center for Labor Market Studies, Northeastern University, Boston, Massachusetts the unemployment in the U.S. hits disproportionately on the poor. 

 

Unemployment Rates and Underemployment Rates of Workers in the U.S. by Household Income Range in the 4th Quarter of 2009 (in %)

Income

Range

Unemployment

Rate

Under-employment Rate(1)

Unemployment

+

Underemployment

$12,499 or less

30.8%

20.7%

51.5%

$12,500 - 20,000

19.1%

17.2%

36.3%

$20,000 - 29,999

15.3%

12.7%

28.0%

$30,000 - 39,999

12.2%

8.3%

20.5%

$40,000 - 49,999

9.0%

6.1%

15.1%

$50,000 - 59,999

7.8%

5.4%

13.2%

$60,000 - 75,000

6.4%

4.4%

10.8%

$75,000 - 99,999

5.0%

3.6%

8.6%

$100,000 - 149,999

4.0%

2.5%

6.5%

$150,000 or more

3.2%

1.6%

4.8%

          Note(1): The unemployment Rate is calculated by dividing the number of unemployed by the employed.

 How can some unemployed have a family income of more than $150,000? Easy, the spouse works, interest from savings, dividend income from stocks, capital gains from investments, and rental properties still provide income for some families while an individual is unemployed or under-employed.  Wealthier individuals can have multiple sources of income.

 For those earning under $30,000 per year the unemployment rate is at depression levels of 15-30%.  In these ranges, the unemployment plus the under-employment rate is a staggering 28.0 - 51.5%, 5 to 10 times higher than families with incomes over $150,000.

Even more telling is the growth between 2007 and 2009 in unemployment in the low income categories.  In the three lowest income categories, unemployment increased 12.4%, 8.4%, and 7.8%, respectively.  Unemployment in the highest income category rose only 1.6%. 

 

Range of

Incomes

Unemployment

2007 4th Quarter

Unemployment

2009 4th Quarter

$12,160 or less

18.4%

30.8%

$12,160-20,725

10.7%

19.1%

$20,725-29,680

7.5%

15.3%

$29,680-39,000

5.6%

12.2%

$39,000-50,000

4.0%

9.0%

$50,000-63,000

3.7%

7.8%

$63,000-79,100

3.3%

6.4%

$79,100-100,500

2.4%

5.0%

$100,500-138,700

2.0%

4.0%

$138,700 or more

1.6%

3.2%

                               Source: The Curious Capitalist, Barbara Kiviat, Wednesday, February 10, 2010

 The Obama Administration will point to subsidies to cover the health costs for the low income.  Under ObamaCare, up to 58% of the population can avail themselves of a healthcare subsidy.  But, the opiate of government welfare is the ultimate fix.  If the unemployed get a job, the individual subsidies begin to decrease.  The financial impact of welfare subsidies is the equivalent of a higher marginal tax rate.  A Cato Institute study shows, for those making $30,000, the equivalent marginal tax rate will be nearly 60%.  That is, for each additional dollar earned, the government will take back sixty cents in taxes and reduced subsidies. That doesn’t provide the poor much incentive to work hard and advance economically. 

 

 We learned in the 1990s that the welfare state established in the 1960s destroyed families and created a culture of generational poverty. In 1997 working with a bi-partisan Congress, President Clinton eliminated welfare as we knew it.  He replaced welfare with workfare. Sixty (60%) percent of welfare recipients got an education and real jobs,  Children saw their parents go to work and earn respect as well as a pay check. With ObamaCare, we are returning to the failed government dependency model that destroyed personal responsibility, family values, the work ethic, and the public’s sincere desire to help families in need.  

The ObamaCare health welfare subsidies for low income do not offset the effective jobless 100% tax. ObamaCare will inhibit the desire for most to advance to the American dream of self-sufficiency, home ownership, nice furniture, college for children, a good car, an annual vacation, debt free living, and financial security.

 Surely, at some point rationality rather than power politics will prevail.  Are politicians that corrupt? Are people really willing to financially subjugate themselves to Washington? Does anyone actually believe that the wealthy won’t respond by shifting earnings, moving assets, lowing wages to their employees, and otherwise legally avoiding confiscatory taxes and penalties? 

 

The Number of Unemployed and Underemployed Persons,

Members of the Labor Force Reserve, the Pool of Underutilized Labor, and

Labor Underutilization Rate by Income of the Household Income Distribution 4th Quarter 2009

 

Income

Range

 

Unemployed

 

Under

Employed

Labor

Force

Reserve

Under

Utilized

Pool

Adjusted

Labor

Force

Under

Utilization

Rate

$12,499 or less

2,523,484

1,172,379

869,399

4,565,292

9,093,930

50.2%

$12,500-20,000

1,377,456

1,005,855

488,993

2,872,304

7,700,944

37.6%

$20,000-29,999

1,885,492

1,330,302

642,565

3,858,359

12,958,122

29.8%

$30,000-39,999

1,686,509

1,012,634

527,184

3,226,327

14,342,149

32.5%

$40,000-49,000

1,018,953

632,966

350,506

2,002,065

11,726,027

17.1%

$50,000-60,000

925,351

594,148

311,318

1,830,817

12,169,020

15.0%

$60,000-75,000

972,009

622,585

29,492

1,894,036

15,456,882

12.2%

$75,000-99,999

875,080

599,808

308,478

1,783,366

17,882,399

10.0%

$100,000-149,000

650,691

388,038

246,145

1,294,879

16,689,379

7.8%

$150,000 or more

353,899

174,407

156,885

689,195

11,301,726

6.1%

Totals

14,698,791

8,915,147

5,360,039

28,974,310

158,787,138

18.5%

 Nearly 6 million of the 15 million unemployed make under $30,000 per year.  The numbers are staggering.  The real intent of health reform was to redistribute wealth.  However, the poor always wind up paying a heavy price for governmental assistance.  A government health welfare subsidy does not support a family or create the dream of a better future.  Government welfare subsidies rob from the rich and steal dignity from the poor.  Government dependency from lost jobs is the most insidious, destructive, and cynical way to govern. 

 Americans understand the need for compassion and helping the uninsured.  That is not what is being promoted with ObamaCare.  By 2019, there will still be 23 million uninsureds. To repeal and replace the health reform bill with a consumer-focused and individually–centered approach will require political sincerity and intellectual honesty.  For the truly compassionate, maybe the most important reality is an understanding that “The road to hell is paved with good intensions.” 

Ronald E. Bachman FSA, MAAA, is a Senior Fellow at the Center for Health Transformation, the Georgia Public Policy Foundation, the National Center for Policy Analysis, and the Wye River Group on Health.  Nothing written here is to be construed as necessarily reflecting the views of the organizations listed or as an attempt to aid or hinder regulations or the passage of any bill before the U.S. Congress.