John McCormack: Watch Out for Obamacare’s Subsidy Cliff: Earn $1 More in Wages, and You Could Pay $20,000 More for Insurance

The Weekly Standard, February 5, 2014

On Tuesday, the Congressional Budget Office released a new study finding that the Affordable Care Act, aka Obamacare, will cause “a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.”

That doesn’t mean that Obamacare will cause 2.5 million employees to be laid off, but rather that the law will encourage the equivalent of 2.5 million full-time workers to drop out of the workforce. Here’s how it will work (or rather, discourage work): Obamacare offers Medicaid to people earning up to 138 percent of the federal poverty line in states that opted into the program, and it provides subsidies to people earning above that amount, up to 400 percent of the federal poverty line. As your income increases, the subsidy decreases.

CBO explains that “the phaseout effectively raises people’s marginal tax rates (the tax rates applying to their last dollar of income), thus discouraging work.”

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