Saturday, January 01, 2011

More Social InJustice revealed as we find out what is in store with Obamacare

More than one observer commented after the passage of PPACA (Obamacare) that social justice has been served. This included at least one U.S. Senator and spokesmen for both the AMA and ACP. As more and more of the thousands of pages are deciphered and given operational meaning and are jiggered with by Congress we find at least some aspects speak more of injustice than justice.

One case in point was elucidated in this commentary by Reason Foundation Senior Policy analyst,Shika Dalmia. She tells the reader about something called the "exchange recapture subsidy".

Under this provision, the government will go after low-wage families to return any excess subsidies they get under the Patient Protection and Affordable Care Act...

When the government hands out subsidies, it will use a household’s income in the previous year as the basis for guessing what the household is qualified to get in the current year. But if the household’s income grows midyear, the subsidy recapture provision will require it to repay anywhere from $600 to $3,500, compared to the $450 that the law originally called for.

So, if a poor working family manages to somehow increase its income higher than the number which the government guessed to be their income for the purpose of handing out a subsidy they are hit with higher taxes with the result being that the marginal tax rate on their incremental gain in income is insanely high. If much or most all or economics is about incentives, what will that do to efforts to move up to the next level of income.

In the interest of fairness, it has been pointed out (see here) that this recapture mess was apparently added on to the last minute doctor-fix in an effort to scrounge up money to help pay for the subsidies and was part of an amendment authored by Republicans. So, maybe Obamacare set up the subsidies and Republicans tried to help pay for it and that was enacted by a legislature nominally controlled by Democrats and made it even worse. In any event, it is a bad deal thanks to those darn unintended consequences. Central planning might not be as easy as its advocates claim.

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