Author Topic: CBO confirms Obamacare subsidies create disincentive to work harder  (Read 257 times)

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Offline happyg

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This all was predicted. Obamacare subsidies decrease the incentive to work harder because as one’s income increases, the subsidies vanish.

It’s what we call the implicit marginal rate which takes into account not only tax marginal rates, but also loss of government benefits. 

In the key 30-50,000 range, the implicit marginal rate has exceeded 100% even before Obamacare (see Featured Image above) – meaning that it is economically irrational to earn an extra dollar because you will lose more than one dollar through taxes and loss of benefits.

Obamacare makes that problem even worse because of the high cost of Obamacare health insurance which depends on subsidies to render it even somewhat “affordable.” Lose those subsidies and the cost of mandatory health insurance becomes onerous.

The CBO is predicting a loss of 1-2% of employee hours because workers choose not to lose the subsidies, as reported by Reuters (h/t Bryan Preston)(full report embedded at bottom of post):

historically high number of people will be locked out of the workforce by 2021, according to a report by the Congressional Budget Office released Tuesday.

President Barack Obama’s signature health-care law will contribute to this phenomenon, the CBO said, citing new estimates that the Affordable Care Act will cause a larger than-expected reduction in working hours—eliminating the equivalent of about 2.3 million workers in 2021 versus a previous estimate of an 800,000 decline.

“CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 to 2 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive,” said the report.

The CBO Report states (in Appendix C): (more…)

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