The Economist Who Exposed ObamaCare

From the Wall Street Journal The Economist Who Exposed ObamaCare

The weekend edition of the Wall Street Journal has an article on Casey Mulligan and his analysis of explicit and implicit taxes in Obamacare and the impact those taxes have on the supply and demand for labor.

A few selections:

The CBO's intellectual conversion is all the more notable for accepting Mr. Mulligan's premise, which is that what economists call "implicit marginal tax rates" in ObamaCare make work less financially valuable for lower-income Americans. Because the insurance subsidies are tied to income and phase out as cash wages rise, some people will have the incentive to remain poorer in order to continue capturing higher benefits. Another way of putting it is that taking away benefits has the same effect as a direct tax, so lower-income workers are discouraged from climbing the income ladder by working harder, logging extra hours, taking a promotion or investing in their future earnings through job training or education.

This is the liberation lauded by the White House, the NY Times and MSNBC, "Some people will have the incentive to remain poorer in order to continue capturing higher benefits."

The stimulus caused a spike in marginal rates, but at least it was temporary. ObamaCare will bring them permanently into the 47% range, or seven percentage points higher than in early 2007. Mr. Mulligan says the main response to his calculations is that people "didn't realize the cumulative effect of these things together as a package to discourage work." 

For years the White House, the Democrats, the NY Times and MSNBC have been screaming for higher marginal tax rates on the rich. It is tragic that their signature piece of legislation raises taxes on the poor and the result is exactly what you would expect:

when you pay people for being low income you are going to have more low-income people 

and

 if you pay unemployed people you're going to get more unemployed people.