Obamacare’s ‘Cool Calculator,’ Part 2: The ‘Wedding Tax’: You're better off shacking up or divorced

Pajamas Media ^ | 09/25/2013 | Tom Blumber

[SeekAndFind]

In a September 13 email, Erin Hannigan of Organizing for Action’s “Truth Team” bragged about a “cool calculator from the nonpartisan Kaiser Family Foundation” showing how Obamacare’s “tax credits” work, and encouraged everyone to “share it on Facebook or Twitter.”

Obamacare’s opponents, especially those who advocate defunding it before it goes live, need to follow Hannigan’s suggestion, and even embed it on their websites and blogs. That’s because what Kaiser’s “cool calculator” really does is expose the statist health care regime’s three ugliest financial elements.

I covered two of them in my previous PJM column. The first is that, when combined with Uncle Sam’s current income and payroll tax regimes, the gradual expiration as income increases of Obamacare’s “tax credits” — which Kaiser’s model schizophrenically describes as “government tax credit subsidies” — will raise the portion of income taken by the government for each additional dollar of earnings to between one-third and one-half, effectively taxing most American workers at marginal rates usually limited to the planet’s highest income earners. The second is that its subsidy “cliffs” will cause middle-aged single people and married couples making as little as $45,960 and $62,040, respectively, to lose over $10,000 in subsidies — or “tax credits,” in the preferred language of OFA and the U.S. Supreme Court’s — when they earn just one additional dollar. These bugs, which jubilant “progressives” as seen above apparently believe are features, will crush incentives to work and to otherwise pursue financial self-improvement.

The third tragic outcome of Obamacare is what it will do to marriages and families. In January 2010, two months before Obamacare’s passage, the estimable Robert Rector at the Heritage Foundation gave the impact a name: the “wedding tax.”

To illustrate, let’s start with the 60-year-old married couple with no children whose situation I illustrated at the end of Part 1:

If they have identical earnings totaling $65,000, which will usually net down to $50,000 or below after all income and payroll taxes, their Obamacare exchange Silver Plan premium next year with the same earnings will be $16,382, or about one-third of what used to be their take-home pay. (And they call it the “Affordable Care Act”?)

What can this couple do? Well, they could decide to earn a few thousand dollars less, which will negate the five-figure premium hit. Encouraging ordinarily willing workers to put in less effort isn’t good in any economy, but especially not this one. But if either spouse’s earnings are unpredictable or hard to precisely track, they could still “mess up” and get socked with a premium they can’t afford.

The “easiest” solution would be to avoid the “wedding tax” entirely by getting divorced while still living together. Here’s what would happen if they make that choice:

Instead of facing an exorbitant premium increase once their combined earnings hits $62,041 if they were to stay married, each cohabiting adult can earn up to $45,960 before Obamacare’s “tax credit”-free premiums kick in. Their annual after-tax savings at age 60 if they shack up and keep their individual earnings between $31,021 and $45,960 will range from $7,650 to over $11,000. The annual savings will slightly increase every year until Medicare kicks in at age 65. That kind of money can buy a lot of gifts for the grandkids.

But the grandkids will also face the prospect of seeing their moms and dads divorce because of Obamacare.

Let’s look at the situation of a 40-year-old couple with two children. The spouses’ annual earnings are $70,000 and $23,000, respectively:

The couple’s annual unsubsidized premium while married is $11,547 (OFA’s vaunted “tax credits” disappear at $92,401 for married couples with two children). But if they divorce and shack up while giving custody of both children to the lower-earning spouse, their combined annual premiums, at $4,317, will be over $7,200 lower. That’s over $600 a month. As was the case in the previous example, the savings from divorce will gradually increase every year. Parents will be torn between doing what Western civilization has considered morally right for millennia and their children’s financial well-being as never before.

MUCH MORE ON NEXT PAGE

There may be contrary examples, but in all of my research into the inner workings of Obamacare as embodied in Kaiser’s model, I was unable to find a single instance where staying married led to a lower net healthcare premium compared to divorcing and living together. Clearly, many couples who are considering marriage, especially after several years of seeing formerly married couples regress to cohabiting, will look at Obamacare’s “wedding tax” and say, “Never mind.” The effect on society will be incalculable, and certainly not for the good.

As designed, Obamacare threatens to turn cohabiting while functionally living as if married into a national sport. Paraphrasing what I noted at my home blog in March 2010, the following grim scenario appears likely:

The law in many if not most states says that you can’t cohabit indefinitely and still claim not to be married.

Because the government will be starved for money, the Internal Revenue Service will task itself with finding cohabiting couples and divorced couples still living together who are “illegally” claiming that they are not married for health care subsidy purposes.

Those caught and punished by the IRS carrying out its new role as the de facto “marriage police” could get hit with multi-year bills for undeserved “tax credits” running into tens of thousands of dollars.

16,500 new IRS agents won’t be anywhere near the number needed to enforce the Obamacare regime.

Open question: What kind of advice will the program’s navigators give to couples in sticker shock over their Obamacare exchange premiums? Will they counsel divorce, or will doing so be considered aiding and abetting tax evasion?

I find it utterly amazing and more than a little disheartening that the arguments made by Rector and yours truly for so long have gained so little traction, even among Obamacare’s most ardent opponents. Principled conservatives with bigger megaphones should not have waited this long to make these critical financial and family values arguments. But here we are, and we’re running out of time.

It’s likely that Obamacare’s implementation, no matter how expensive, incompetent, riddled with fraud and cronyism, compromised by privacy invasions and identity thefts, and disrespectful of Americans’ religious consciences it turns out to be, will be irreversible. To my knowledge, no other major entitlement program in U.S. history, no matter how unworthy or fiscally ruinous, has ever been fully repealed once it began — which is why Obamacare cannot be allowed to take effect.

If the results presented in this and the previous column aren’t enough to persuade Republicans and conservatives that it’s “now or never” time to defund this madness, what ever will be?

[grundle]

Here are 59 reasons why hypocrite politicians and unions that support Obamacare want exemptions for themselves

[silverleaf]

wait until the homosexual marriage lobby discovers how many married gays are now 3/5 of a person for tax exemption purposes

welcome to the party, pals!

[donmeaker]

Marriage has long been a hidden contract, the terms of which you don’t learn until its dissolution.

[Rusty0604]

So legalizing gay marriage was just a sinister plot to tax them more?/sarc

[Baynative]

I’m trying to find some details. I’d like to know if the deductible is separate from the out of pocket cap. In WA a family of four making $100,000 a year will have apremium of $876 a month. That's for the Silver plan with a $10,000 deductible.

The way the silver plan details read it looks like a family of 4 will pay for every bit of their HC except catastrophic occurrences.

That would mean eye care, vaccinations, physicals, broken bones and stitches and minor hospitalization like tonsils would all be out of pocket.

The idea of getting a lot of young families to pony up to make this work sounds good if they can afford platinum plans.

What isn’t being considered is that folks raising kids have a lot of expenses such as dental care, braces, glasses and chronic conditions like asthma that really add up and they would get no help in this plan that I can see. I'm not finding all the facts in this foggy plan, but it looks like the bestway to afford cheap HC is to be completely on the dole.

Working families making under $225,000 are going to be hit hard.

[Zeneta]

Great post.

If we are hit with the slightest inflation as the FEDS continue to destroy the US dollar to achieve 0bama’s goal of doubling US exports, incomes will go up to keep up with the loss of buying power.

What are the odds that the Gov’t will recalibrate their calculators in a timely manner in order to keep folks from being totally screwed.

[Tanniker Smith]

Gay marriage is like pot: legalize it and then tax it?

[Driabrin]

Let’s all remember that the government recognizes your marriage only if you buy a marriage license. If you get married in church and keep it between you and God, the government will still consider you single.

[angry elephant]

We used to have the wedding tax before Bush took it away. Years ago I told my lesbian bookkeeper who wanted to marry her long time girl/boyfriend that if gays could marry they would be subject to the tax.

She said, “Maybe it could be some kind of civil ceremony.” I told her civil doesn’t change anything for straight couples so gays would have to have the same tax.

Bush took away the marriage penalty so as to encourage stronger families. Then lo and behold, no penalty, gays rush to marry.

And now those couples will be subject to Bummer’s marriage tax.

[tanknetter]

It makes for an interesting situation, for sure.

The gay lobby is incredibly powerful. Probably second only to the pro-2nd Amendment one. AND they have the full backing of the press, not the vilification that gun rights lobby experiences.

So we’ll see what happens when gays, still euphoric over their newfound “right” to marry, run smack dab straight into the marriage penalty.

[Prince of Space]

The first scenario fits my husband and I to a tee. We cannot possibly survive on the income listed to qualify for a subsidy, but we also cannot afford to pay the exorbitant premiums for Obamacare. So how in the world is this “affordable?”

[Beagle8U]

Another unmentioned feature?/bug in Owebamacare is the law requires an employer to offer insurance to the employee, but it never mentioned the family of a covered employee.

It also offers a credit on the insurance of that employee that goes to the employer that offers the coverage.

Only those not offered insurance by their employer qualify for the credits in the state exchanges.

Read that last part several times, it’s very important.

Many employers can and will opt to save money by only offering coverage to the employee. The family is left uncovered AND unable to qualify for credits in the exchanges!!!

If say the husband/father is covered at work and earns over about $45,000 a year the family wouldn’t qualify for Medicaid either, because that is based on household income.

The idiot liberals that voted for O’bastard are just starting to find out the truth and they are fuming.

[Rusty0604]

I guess that’s one way to make sure everyone pays their “fair share”.

[Buckeye McFrog]

Actually one of about 59 incentives in benefit programs and the tax code that provide perverse incentives for shacking up over marriage (or encourages long-married senior citizens to divorce on paper).

[Rusty0604]

I saw that that glitch will cause 500,000 children to lose coverage. That number sounds low to me.

[WhyisaTexasgirlinPA]

Here are a few of my questions:

If young people are supposedly going to be paying in to prop up this disaster, and they get subsidies if they make below $45K a year, and those who make more than $45K a year have health insurance paid by their employer, how is there any money going toward this ponzi scheme? I realize there is a tax on every single employer paid plan but still, they keep saying young people will buy in. Instead, the government will be subsidizing them.

How will young families be able to afford this? If they are struggling to pay for a home and car, how can they come up with an additional $10K a year or more to pay for health insurance?

So we are back to the government giving insurance to the drug dealers and prostitutes and hippies who don't work and don't qualify for welfare/medicaid because they don't have children living with them. Reparations

[Rusty0604]

Regarding pot: The subsidy calculators add in thousands to your premium if you smoke, I wonder if that is explicitly for tobacco? Smoking pot and other drugs is just as unhealthy or worse.

[varyouga]

“We cannot possibly survive on the income listed to qualify for a subsidy, but we also cannot afford to pay the exorbitant premiums for Obamacare. So how in the world is this “affordable?”

Arbeit macht frei...

[Beagle8U]

“Regarding pot: The subsidy calculators add in thousands to your premium if you smoke, I wonder if that is explicitly for tobacco? Smoking pot and other drugs is just as unhealthy or worse.”

They also add in thousands for any pre-existing conditions, just like before.

Yep, you would be guaranteed coverage, but you still wouldn’t be able to afford it.