Skip to comments.Obamacare’s ‘Cool Calculator,’ Part 2: The ‘Wedding Tax’: You're better off shacking up or divorced
Posted on 09/25/2013 9:27:08 AM PDT by 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.
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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 cant 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 wont 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?
“If the results presented in this and the previous column arent enough to persuade Republicans and conservatives that its now or never time to defund this madness, what ever will be?”
The author implicitly assumes that the gop cares what happens to “the little people.”
The thing about this is it kind of compliments a strategy I think conservatives should embrace: boycotting state marriage. Go get married in church and skip the license.
From the documents I received from my employer this week, those exchange health care plans are paid for in after-tax dollars.
I have a feeling there are going to be lots of people crying when they see how much they’re going to have to pay. And even more crying when they find out Granny or Momma is going to be sent home to die without pain meds.
We here know this is going to be bad. Most of the idiots in this country have no idea. I really believe this country will be third world status within 5 years.
If you file your taxes as a single divorced person do you have to include a copy of the divorce decree? I’ve never had to provide one before and I’ve been through 3 divorces.
I wonder if this isn’t all going to come to a screeching halt about one week after people start going online.
I’d like to see the looks on the obama voters’ faces when they figure out how much their “affordable” insurance is going to cost them. It almost makes me regret having cut off communication with them.
Did you mean to say “suckers”?
My Wife and I fit that Demographic to a tee.
Look what the war on marriage has done so far.
Somehow we (4) manage to survive on less than the lowest income listed for the biggest subsidy. Been surviving that way for a decade.
Exactly! My south of the border neighbors (not my real neighbors, I’m speaking metaphorically) in my town were married in Mexico. They are not recognized as married here in the US. Thus they get SNAP as they both file as no income (most get paid in cash), and they both file as having custody of the kids (no SS card, so... no way to cross reference). They get WIC cards, no taxes (except sales taxes), food for the kids in school, free schooling (our public schools are NOT free here to the average working family). The list of bennies goes on and on.
They have no desire to get married legally, and are trained not to do so.
Similar but not the same with Baby Mommas and their Baby Daddies. You make more money being single and claiming your kids as dependents.
This is why folks who have way less than me can afford to drive Escalades, and I drive a VW TDI.
Pimp it good.
isn’t a VW TDI toureg better than a Escalade?
Though they will deny it,
this is intentional on the part of the left.
Just as in 1984 - relationships, marriage, and family are discouraged and all loyalty is to be to the government.
There’s an old saying in the computer field: “That’s not a bug. It’s a feature.”
Well, I hope so. We just got it a few months ago. Actually based on discussions here on FR.
We bought a 2012 TDI wagon. Winter is coming, so we’ll see how it goes.
The point was cost. I’ve worked my whole life, owned a successful business, and I wouldn’t dare drop down 50k on a car, then toss another 5k into it with rims and sound system.
I would be a fool to do so. But then again, you know what they say about money easily earned... it’s easily spent. My kids say I’m a miser, and I have moth-balls in my wallet. Lessons taught to me by my parents who grew up in the depression I guess.