(A version of this Health Alert was published by Forbes.)
You read that headline right: It is not only those who pay Obamacare taxes who suffer, but those who receive them. That’s because the tax credits are calculated so perversely that people who receive them actually get punished for working more hours. In the wake of the Supreme Court’s forthcoming decision on King v. Burwell, which will determine whether tax credits paid in at least 34 states are legal, fixing this should be a priority for Congress and President Obama.
For the first time since 2012, the Congressional Budget Office has done a comprehensive estimate of the costs and benefits of Obamacare. The new estimate concludes that repealing Obamacare would increase Gross Domestic Product by 0.7 percent over the next ten years. The primary reason is the disincentive to work contained in the design of the tax credits.
Of course, President Obama is not going to repeal Obamacare. Nevertheless, in the wake of King v. Burwell, much of this problem can be alleviated without doing violence to the president’s goal of increasing coverage, as I describe in a new study from the National Center for Policy Analysis (NCPA).