Wednesday, July 31, 2013

Tax rates far above 100%

CNBC reports on a feature of Obamacare that is going to be hard to defend.  Subsidies will be available for some to purchase health insurance.  The subsidy, a fixed dollar amount worth thousands of dollars in many cases, disappears the instant one proceed $1 over the income limit.

I'm no fan of phase-outs, but this seems really harsh.  The stakes for middle class tax planning just went through the roof.  Whatever you do, don't realize investment gains until you know the full consequences of them. Here's an example from the article:

Under a scenario that identified, a couple in Ohio, both age 50, would be eligible for subsidies worth $3,452 to purchase a so-called silver insurance plan—a moderately priced level of benefits under the ACA's scheme—that costs $9,346 annually if they made up to $62,040 per year.

But if they made just $1 more than that, they would lose the subsidy. Wu noted that the couple then would have to earn at least $65,492 to make up for the lost subsidy.

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