TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, February 4, 2010

WSJ: Families With $45k AGI Face 41% Marginal Tax Rate Under ObamaCare

Wall Street Journal op-ed, Another Obama Tax Hike: The Senate Health-Care Bill Would Raise Effective Marginal Tax Rates on Lower and Middle-Income Singles and Families up to 41%, by Douglas Holtz-Eakin (Former Director, Congressional Budget Office; Fellow, Council on Foreign Relations) & Alex Brill (American Enerprise Institute):

[The Senate health care bill raises] to shocking levels the effective marginal tax rates (EMTR) on lower and middle-income singles and families--with the government taking up to 41% of each additional dollar. ... 

WSJ Chart 

The solid line shows the EMTR based on income tax law prior to the health-care bill (it excludes the impact of the payroll taxes). The dashed line displays the damaging increases in the EMTR assuming the health insurance premium subsidies contained in the Senate health-care bill and insurance cost estimates provided by the Kaiser Family Foundation. As a family's income rises above 133% of poverty, Medicaid eligibility will be eliminated but a family that does not receive health insurance from their employer will receive a subsidy to purchase health insurance in the "exchange." In turn, however, as their efforts yield higher income, subsidies are clawed back or effectively taxed away. The current law policies show that there are already some lower income families facing EMTRs above those in the middle class. But the barrier to success imposed by health-care reform is even more striking. According to the Congressional Budget Office, about 20 million people would receive a subsidy to purchase insurance through an exchange and thus face a higher EMTR.

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These people are mad. It means nothing to them because they will never feel the effects of a 41% tax on income. No right thinking American could possibly believe this is a good idea. Most of congress are crooks, I believe. They get a free ride and when they retire or are voted out of office they will still be wealthy. I don't begrude them their wealth, just the free ride they get on our backs.

Posted by: Ashen | Feb 5, 2010 6:03:21 AM

Hey, it's worse than that:

"The solid line shows the EMTR based on income tax law prior to the health-care bill (it excludes the impact of the payroll taxes)."

Add 15.3% to that 41%, dude.

Posted by: Chester White | Feb 5, 2010 6:03:22 AM

A regressive tax? Good. It's about damn time.

Bring on Cap & Tax and/or VAT for the exact same reason.

- Bitter in April

Posted by: Hogarth | Feb 5, 2010 6:15:18 AM

It appears if we want European-style Healthcare, we'll end up paying European tax rates.

Posted by: Doug | Feb 5, 2010 7:37:29 AM

Obama = liar.

That's about the best thing that can be said about him.

He isn't a miserable failure; he is an absolute, complete, and total failure.

Posted by: JB | Feb 5, 2010 9:24:30 AM

"Add 15.3% to that 41%, dude."

And state income tax and sales tax and property tax and the various communications taxes on your phone bills, cable bills, taxes on your airplane tickets, hotel rooms, etc.

Not much left.

Posted by: Concerned Citizen | Feb 5, 2010 10:05:00 AM

European tax rates? No, we're fixing to be worse than that. If we want to have European-style health care, and European-powerful armies, then we could have comparable tax rates. If we want "free" health care, and also more legions than the rest of the world, then we must have rates still higher. High enough to crush.

Posted by: Mark Creatura | Feb 5, 2010 10:50:07 AM

Americans have decided that adhering to political correctness is more important than prosperity. These problems will not be solved until :

a) The rest of America holds black people accountable for the fact that they vote 90-95% Democrat, no matter what.

b) Men hold women accountable for their actions, and the fact that most Federal spending is the transfer of wealth from men to women. Most divorce laws are also a hugely unfair transfer from men to women.

Not politically correct? Well, if that matters to you more than the US economy.....

Posted by: Toads | Feb 5, 2010 12:45:33 PM