The purpose of next week’s health care summit seem to be to recreate some momentum for the Democrat’s health care legislation, and to put Republicans on the hook for failing the public—particularly the poor—by condemning them to the status quo by blocking legislation. Yet the working poor would be among the biggest losers from the Democrats proposals. The Cato Institute’s Michael Cannon details a few of the ways that the current legislation would hurt low-income workers, in his latest policy study, “Obama’s Prescription for Low-Wage Workers: High Implicit Taxes, Higher Premiums.” Here’s a highlight:
House and Senate Democrats have produced health care legislation whose mandates, subsidies, tax penalties, and health insurance regulations would penalize work and reward Americans who refuse to purchase health insurance. As a result, the legislation could trap many Americans in low-wage jobs and cause even higher health-insurance premiums, government spending, and taxes than are envisioned in the legislation.
Those mandates and subsidies would impose effective marginal tax rates on low-wage workers that would average between 53 and 74 percent— and even reach as high as 82 percent—over broad ranges of earned income. By comparison, the wealthiest Americans would face tax rates no higher than 47.9 percent.
Over smaller ranges of earned income, the legislation would impose effective marginal tax rates that exceed 100 percent. Families of four would see effective marginal tax rates as high as 174 percent under the Senate bill and 159 percent under the House bill. Under the Senate bill, adults starting at $14,560 who earn an additional $560 would see their total income fall by $200 due to higher taxes and reduced subsidies. Under the House bill, families of four starting at $43,670 who earn an additional $1,100 would see their total income fall by $870.
Regardless of how the White House and the media try to spin what happens next week, it’s good news for Americans—and particularly those with lower incomes—if the current version of health care reform is defeated.