The ACA’s 100% Marginal Tax Rate

Ginger Chapman and her husband, Doug, are sitting on the health care cliff.

The cheapest insurance plan they can find through the new federal marketplace in New Hampshire will cost their family of four about $1,000 a month, 12 percent of their annual income of around $100,000 and more than they have ever paid before.

Even more striking, for the Chapmans, is this fact: If they made just a few thousand dollars less a year — below $94,200 — their costs would be cut in half, because a family like theirs could qualify for federal subsidies. (NYT)

Comments (13)

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  1. Tommy says:

    Why set a health care subsidy cliff? Why not a graduated subsidy scale?

    • Yancey Ward says:

      To do so would have meant raising taxes higher to support the higher subsidies such a graduated phaseout would have required, or lowering the subsidies available under 400%PV in order to stretch them into the higher income levels. The Democrats tried to do this on the cheap.

  2. Oliver says:

    Basically, they are earning the same amount post-health coverage as the other family.

  3. Mark Won says:

    “The cheapest insurance plan they can find through the new federal marketplace in New Hampshire will cost their family of four about $1,000 a month, 12 percent of their annual income of around $100,000 and more than they have ever paid before.” That’s way too high regardless. It’s more than they’re saving towards retirement.

  4. Martha says:

    A bill several thousand pages long and still riddled with these kinds of silly flaws.

  5. Yael Suhkas says:

    This could incentivize people to ask for a lower salary if it provided a lower tax liability.

  6. Perry says:

    An appropriate musical accompaniment for this article would be “Goodbye Yellow Brick Road” by Elton John.
    The Middle class is waving bye-bye.

  7. Jerry says:

    ^ More like Goodbye American Pie.

  8. Hank says:

    This is why the young and healthy won’t sign up.

  9. Tony says:

    I believe the threshold to contain costs is to have 14 million sign up. They’re only at a million right now.

  10. Perry says:

    What about the other 25-30 million or so?

  11. Floccina says:

    That needs to change.

  12. Bob Hertz says:

    I appreciate the comment by Yancey Ward that better subsidies would cost more in tax dollars.

    But I am not sure that the cost would be all that enormous. Hear me out.

    1. Assume that eventually 15 million persons will be on the exchanges.

    2. Assume that 30 per cent of this group will make over 400% of poverty.

    3. Assume that their incomes average $60,000. Right now the subsidies stop at about $41,000 for an individual.

    4. The goal of subsidies is these higher levels is get the net cost of health insurance down to about 9.5 of income.

    5. The anount of subsidy to accomplish this for a $60,000 earner would i think be about $2,000.

    6. 6 million new persons getting a new $2,000 subsidy comes to about $12 billion a year in extra federal spending.

    That is not a whole lot in federal government land. Medicare spends that much
    every single week.

    Spending the extra $12 billion would defuse a lot of the opposition to the law.
    I am not saying that this is a good thing, only that this is a fairly cheap way to preserve the law.