Why the Baucus bill Doesn’t Help the Middle Class[Economic Case Against Baucus Health Bill]

ArticlesBase.com ^ | Oct 15th, 2009 | by ArticlesBase.com

[Son House]

Back to the economic case against the Baucus health-care bill. The Harvard economist Greg Mankiw looks at some new data from the Congressional Budget Office and calculates the marginal tax rate that the bill piles onto middle-class families:

According to CBO, a family of four making $54,000 would pay $4,800 for health insurance. The rest of the premium would come from government subsidies. If the family’s income rises to $66,000, the subsidy falls, and the cost of health insurance rises to $7,600. In other words, earning an additional $12,000 requires the family to pay an additional $2,800. The implicit marginal tax rate is $2,800/$12,000, or 23 percent.

Similarly, a single person earning $26,500 would pay $2,300 for health insurance, but if his income rises to $32,400, his premium rises to $3,700. This yields an implicit marginal rate rate of 24 percent.

As Mankiw notes, these increases come on top of marginal income and payroll taxes. A family of four earning $66,000 a year probably falls into the 15 percent tax bracket, meaning most if not all of those additional earnings would be taxed at the 15 percent rate. So besides the loss of $2,800 in subsidies, this hypothetical family would pay an additional $1,800 in federal income taxes…plus 6 percent, or $720, in state income taxes here in Georgia…plus 7.65 percent, or $918, in federal payroll taxes.

So our family of four is actually forfeiting more than $6,200 out of its $12,000 raise.

Now, the president has denied that forcing Americans to buy something they weren’t buying before constitutes a tax, so my guess is that he and other Democrats will try to argue that this isn’t one, either. They will say that taking away a government subsidy is not the same thing as taking away earned income. And from a purely semantic standpoint, that may be true.

The key phrase here, however, is “marginal tax rate.” Economists use this phrase to describe the taxes a worker pays on the last (or next) dollar earned. It’s important, because it factors into a worker’s decision to earn more money by working overtime, furthering his education or accepting a promotion; or an entrepreneur’s decision to start a business; or an investor’s decision to invest more money; or a company’s decision to expand. The question is: Is it worth the effort or risk?

Seen in that light, the sliding scale of subsidies absolutely represents a rising marginal tax rate, or its practical equivalent. And it doesn’t matter that some earners would nevertheless decide to make the additional effort or take on the additional risk — as long as a sufficient number of them don’t, the economy won’t grow as much as it might have. As Mankiw also notes, CBO does not factor in these potential macroeconomic changes when scoring legislation, including the Baucus health bill. So it’s not counting the full economic cost of the legislation.

The fact that these kind of marginal rate increases happen right around the median household income level — and right around the level where, the data indicate, families are having to decide whether they can afford to purchase insurance — makes a downright mockery of the idea that this plan is designed to help the middle class.

It is designed to increase the number of people dependent on government. Period.

[Son House]

This Health SCARE is only about insurance, in America 2009, no one is denied medical treatment

[stockpirate]

Here is something that ties in to this story. GUN RIGHTS GONE!

http://www.freerepublic.com/focus/f-news/2364468/posts

[ExTexasRedhead]

This is about taking your freedom away. Nothing else.

[They'reGone2000]

When the moonbats are in the WH

and the Deceiver is appointing Czars

Then theives will steal our nation

and socialism will steer the stars

This is the dawning of the age of NEFARIOUS

The age of NEFARIOUS, NEFARIOUS

Disharmony and reparations

blame shifting and spin abounding

no more transparency or integrity

golden urine streams of drivel

mystic liberal machinations

and the mind's true incarceration.

[MNJohnnie]

Great article thanks for posting