Marginal tax rates of 70% for the working poor

[drscott]

Greg Mankiw points to this back-of-the-envelope calculation that suggests the working poor will find 70% of their increased income taxed or clawed back under the proposed health insurance reform bills (but since the details remain to be settled, a complete appraisal is not yet possible.)

This means many poor families will discover there's almost no incentive to taking a better, higher-paying job.

This, along with the high hidden tax in the form of compulsory, higher-cost insurance premiums for healthy younger people, makes this proposal one of the largest transfers of wealth in history from young working stiffs to over-50 slobs with lifelong bad habits.

While the proposals do allow for rewards to company-insured people who maintain good habits, on the whole it removes any financial incentive to maintain good diet and exercise habits for almost everyone else.

Comments

[joebehrsandiego.livejournal.com]

Curtis - Just wanted to thank you for your perspective on the issue (this post and previous ones).

My differences of opinion are all "around the margin" ... I'm pretty disappointed with how both the White House and Congress are performing.

[dr-scott.livejournal.com]

It is sort of a Devil's bargain. A fervent minority wants single-payer or government-run health insurance; our current system is falling apart as Medicare and Medicaid underpay and discourage innovative delivery modes, and clients and doctors both struggle with third-party payers.

Recognizing that the taxes to straightforwardly subsidize insurance for the poor and already-sick would not be politically possible, Congress and the administration are trying to set things up so that some people are invisibly taxed, while other hypothetical savings requiring never-before-seen Congressional resolve to cut Medicare reimbursements pay for the rest. It is complicated to hide who actually pays, and locks in some of the worst inefficiencies of the current system.

Now some people think it's better to pass something now and fix it later, but past examples of that thinking usually lead to long-term entrenchment of a bad system.

[ozdachs.livejournal.com]

A fervent minority...

The polls I have heard have a majority favoring these. Perhaps it's the wording of the question.

In any event, the status quo is horrible and one reason Obama and the democrats won the last election was their promise of reform. I see most of the attacks on reform ideas as disingenuous nit picking whose real purpose is to stop all meaningful change. It's the "I like black people, but it's that this one isn't qualified" -type of false argument.

In my mind, it'd be very hard for a changed system to be as bad as the one we have. Unless, of course, you like going around chanting "We're 37th! We're 37th! We're 37th!" to celebrate the US's position in health delivery.

[dr-scott.livejournal.com]

Megan McCardle gets this right:

Progressives are watching the whole health care legislative process with utter dismay as it produces a monster of a bill that not even its mother could love--and trying to love it anyway, on the grounds that it's a start. But this ridiculous hodgepodge, this hypertrophied Rube Goldberg apparatus, is not some startling aberration of the political process, induced by some Republican dark magic. This is the kind of thing the American political system produces. This is why all of our programs have a substantial element of the inexplicable and bizarre.