The Obama Administration yesterday backed down from its plan to tax the earnings on 529 savings accounts, a kind of saving account for higher education under section 529 of the tax code. At Bloomberg, Richard Rubin and...
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- Obamacare Raises Marginal Tax Rates above 50 Percent
Obamacare Raises Marginal Tax Rates above 50 Percent
There has been a lot of talk about the low number of sign-ups and the increase in premiums under Obamacare, but as we’ve reported previously Obamacare also increases taxes. In all, the Affordable Care Act includes 21 taxes at a cost of over $1 trillion dollars. But just as importantly, the ACA increases marginal tax rates.
According to Casey Mulligan of the University of Chicago, the ACA will drive marginal tax rates above 50 percent for “non-elderly household heads and spouses with median earnings potential.”
Mulligan argues that the high marginal taxes caused by Obamacare’s new taxes, accompanied with the higher marginal tax rates created by many of the enhanced programs from the Reinvestment and Recovery Act (SNAP, Medicaid, unemployment benefits, etc.), will create a financial disincentive for work.
“In the years 2015 and beyond,” Mulligan writes, “full-time workers with median incomes will keep only half of the compensation created by their decisions, with the other half going to the government in the form of additional taxes and savings on subsidy payments.”
Mulligan warns that “[w]ithout new federal legislation and a departure from the strategy of forcing workers and employers to finance everyone else's health care, the new 50%+ rate will not be a peak, but rather a new normal for tax rates.”
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