The Obamacare Cliff: redistribution and the disincentive to work

As awful as Obamacare has been at its purported goal of making health care affordable, it has been unquestionably successful at one of Obama's other primary goals: the redistribution of wealth.  Unfortunately, the poor design of the redistribution function is one of the reasons Obamacare is failing.

As the Economist points out, Obamacare imposes new taxes and costs on the middle class to fund subsidies for low-income earners.  Low-income people get Obamacare for almost free, while middle class families are required to pay full freight for the most expensive government health care plan in the world by far.

Progressive taxes and fees almost always cause a reduction in economic activity due to the incentive effect, but this effect can be minimized if the progressivity is intelligently, efficiently designed.  Which Obamacare was clearly not.

One of the basic rules of progressive income taxation is that you should never have marginal tax rates over 100% (or, realistically, anywhere near 100%).  If you start taxing people over 100%, they quickly decide to stop earning.  Obamacare contains an extreme violation of this rule.

The Obamacare subsidy calculator from the Kaiser Family Foundation illustrates the cost of Obamacare at various income levels.  For a married couple in their 50's in San Diego, subsidized Obamacare costs range from $61 per month to $507 per month, while the unsubsidized have to pay $1107 per month, or more than $13,000 per year.  That's a lot of money to a middle-income couple (and that's for the high-deductible "Silver" plan!).

Looking at the data from running the KFF calculator at different income levels, we see that there is an "Obamacare Cliff" for our hypothetical San Diego couple.  If they earn a combined $63,000, they have to pay only $507 per month for Obamacare.  But if they earn $64,000, they have to pay $1107 per month, reducing their take-home pay by $6410 (considering state & federal taxes as well).  That's a 741% marginal tax rate on that additional $1000 of income!

Under Obamacare, this couple actually gets more take home pay if they earn $55,000 than they do if they earn $65,000!  That's a strong incentive to cut back hours.  Why work more hours if the government is going to take all your additional earnings?  Take some time off, pick up a hobby!

The income level at which the cliff happens will vary by family (the cliff happens at $98,000 for a family of four in Omaha, for example), but everyone has a cliff at some income level.

Think this is just theoretical and nobody actually manages income around tax incentives?  Don't be so sure.  I first learned of the Obamacare Cliff from a friend whose neighbor is nearing retirement and managing his income precisely around the Obamacare Cliff.  And any competent tax advisor will certainly be advising his clients near the cliff to do anything they can to stay on the right side.

But that's not all.  The cliff is likely to get even bigger with the huge Obamacare premium increases expected in 2017.  This will not end well.

UPDATE: Labor economist Casey Mulligan has written a whole book on the negative side effects of Obamacare costs and subsidies.


A somber and reflective Memorial Day to all in this eighth year of Our President of Perpetual War

World War II veterans saved the world from global imperialist totalitarian regimes.

That's quite different than asking today's service members to die in a futile and counterproductive occupation of third world countries.


Greenspan's Body Count: Scott Westerhuis, Nicole Westerhuis, Kailey Westerhuis, Jaeci Westerhuis, Connor Westerhuis, and Michael Westerhuis

Like Los Angeles' notorious Grim Sleeper, this century's most prolific serial killer, Alan Greenspan, has gone dormant for several years.  Rising property values and dwindling foreclosures put a long pause to his debt-based killing spree.

But that old ghoul has once again reared his ugly head.

Argus Leader:
A man accused of embezzling more than $1 million from a state education cooperative had tens of thousands of dollars in debt at the time of his death, claims against his estate reveal.

Scott Westerhuis, the former business manager of Mid-Central Educational Cooperative, owed more than $45,000 to a man who remodeled his home, $15,000 for an outstanding credit card and almost $120,000 for unpaid loans on cars, four-wheelers and a boat.
NY Daily News:
Financial issues appear to have contributed to an educational cooperative business manager’s decision to kill his wife and four children with a shotgun before setting the family home ablaze and then shooting himself, South Dakota’s attorney general said Tuesday.

Attorney General Marty Jackley released the results of his office’s investigation of the September deaths at a news conference in Platte, a few miles north of the burned ruins of the home where the bodies of Scott and Nicole Westerhuis and their children Kailey, Jaeci, Connor and Michael were found.

Greenspan's Body Count stands at 255.


Leftists plan to donkey-punch Trump in San Diego tomorrow

Legal Insurrection
... There’s at least six different networks or groups mobilizing their supporters to show Trump that San Diegans will not stand for him. The groups range from Republicans, Democrats, to anarchists, and social justice veterans, to the UniĆ³n del Barrio and border activists. These groups will all have their own tactics, displaying a diversity of opposition to Trump. And then there’s the janitors – hundreds of them will be demonstrating and marching through downtown.


Feelin' the Bern in Vista!

Following just one day after Bernie Sanders' enormous rally in southern San Diego County's National City, Bernie headed to north San Diego County's city of Vista. 

Arriving at 11am, 2 hours before showtime, the line stretched for more than a half mile all the way down Longhorn Drive and around the corner onto Shadowridge.

In addition to Secret Service and local sheriff deputies, security was handled by TSA pervs. But they didn't touch my junk.

The crowd was pretty big, filling most of the football field and the home side bleachers.  It was mostly young, with a few older hippies mixed in.

This girl is an actress named Shailene Woodley.  She's not known for her brains.  She told us that the establishment doesn't want us to conform, and "conformity takes individual thinking."

Bernie was a dynamic speaker, even to a guy like me, who wasn't buying everything Bernie was selling.

The good: ending the war on drugs, reforming the criminal justice system, stopping the global military empire, calling out Hillary's fealty to Wall Street.

The bad: $15 national minimum wage, solving every problem with a new federal program and more federal involvement in every aspect of economic life.  The math behind replacing Obamacare with "Medicare for all."  Threatening to rule by Obama-style executive order (specifically on amnesty).

The ugly: Bernie repeatedly mentioned the student debt problem, but didn't get that the problem is a federally-financed tuition bubble and bloated school administrations with outrageous pay, perks and pensions.  Or maybe he does get it but that's his base.  Anyway, he didn't want to fix the tuition bubble but instead wanted to give everyone free tuition paid for by a tax on Wall Street. I don't think a financial transaction tax would generate anywhere near the revenue he thinks it would, but math seems to be a secondary concern.

Here's Bernie talking about Hillary's Goldman Sachs speeches, then going into school debt:

Video of full speech here.

After more than an hour speaking, Bernie received wild cheers and shook hands like a rock star as he left the stage.

Bernie certainly has the enthusiasm on his side.  Hillary voters are in "hold your nose" mode at best.  But the numbers look tough for Bernie in California unless the polls are completely underestimating his ability to bring out new voters.


San Diego Smackdown! Sanders crowd 10,000; Bill Clinton "hundreds"

San Diego is Feeling the Bern!

In just one of two local appearances this weekend, Bernie Sanders drew a huge crowd:
“I’m running for president because we are going to create an economy that works for all of us not just wealthy campaign contributors,” Sanders said at yet another of his massive rallies, this one in Kimball Park with a crowd estimated at 10,000.
Across town "big dog" Bill Clinton drew "hundreds":
Bill Clinton told hundreds of people in the Bonita Vista High School gym — and hundreds more in an outdoor overflow area where his comments were piped in — that they needed to help deliver a big win and the necessary delegates to allow Hillary Clinton to clinch the nomination before the summer Democratic convention in Philadelphia.
Sanders is expected to draw thousands again today in northern San Diego County at Vista's Rancho Buena Vista High School.


Marc Mezvinsky loses 90% of client assets betting on Greece

I've got a good idea. Why don't we give Hillary's silver spoon douchebag son-in-law 2%-and-20% and he'll invest our money in Greece! What could go wrong?

Chelsea Clinton’s Husband Closing Hedge Fund After Losing 90 Percent Of Its Money

Investors would have got a better payback if they'd donated to the Clinton Foundation instead.

Apple doesn't fall far from the tree, eh?


Quebec government workers love Celine Dion's "Take a Kayak"

Who can blame them for seeking one of comedy's all-time greatest hits?

Full transcript, and link to hilarious video, here.


Trump is John Roberts' fault

Roberts essentially told would-be Trumpistas not to bother the courts with important issues, that if you want to beat Obama you have to get your own strongman—complete with pen, phone, and contempt for the Constitution.


Douche Bank proposes wealth tax in wake of failed QE experiment

Douche Bank:
It is becoming increasingly clear to us that the level of yields at which credit expansion in Europe and Japan will pick up in earnest is probably negative, and substantially so. Therefore, the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes.
In this time of extreme and despotic central bank policy, astute readers may note that gold buried in the backyard or held in Singapore safe deposit is immune to both negative interest rates and wealth taxes.

In defense of The Jungle Book

KT Cat writes of the new Jungle Book moral:
Pray to the nature gods, children. Beg forgiveness for the sins of your white, patriarchal ancestors who are destroying the Earth. Repent and discard the evil, rapacious ways of the past or face the desert hell of Global Warming Climate Change Species Extinction whatever we can throw at you to show you images of damnation created by the encroachment of Western Man onto the primitive Eden of nature.
I went to see the Jungle Book with a young Disney shareholder and quite enjoyed it.  I don't think you have to be a leftist or anti-capitalist to be concerned with man's impact on natural ecosystems.  The lore of elephants as creator-gods was similar to cultural beliefs of primitive people around the world, and I didn't find it offensive.

But go check out Disney's other current hit, Zootopia.  The villains are government agents who use murder and deceit to turn the people against each other and maintain power.  Now that's a message kids need to hear!

Too much information

Happy Super Tuesday!