Wednesday, October 2, 2013

The ObamaCare Marriage Tax

Apparently, the writers of the ObamaCare legislation don’t think a lot of marriage. It is utterly fascinating how liberal Democrats will push for gay marriage, and yet undertake tax policies that penalize those who are married. If ObamaCare is not repealed, there will be substantial incentives to get a divorce due to ObamaCare.
I’ll bet there will be a lot of ObamaCare divorces. A study by the Heritage Foundation shows that married couples are harshly penalized for being married. The older a married couple is, the more harshly they are penalized.
As the Heritage study was completed in 2010, but is timely given the current congressional debate on the issue. As their study shows, the anti-marriage penalties occur because of the way income is based on joint income.  If a two-earner couple is married, the bill counts their income jointly; since the joint income will be higher, a married couple’s health care subsidies would be lower.  If a couple cohabits rather than marrying, the bill counts each partner’s income separately.
The bottom line: under the bill, a cohabiting couple would receive substantially higher health care subsidies than a married couple even when the total incomes of both couples are identical.
The penalty is worse for older couples. Heritage notes:
For example, a 60-year-old couple, each earning $30,000 per year, would receive $10,425 per year less in benefits if they marry or remain married. Simply by divorcing and then living together, the couple can boost their post-tax, take-home income by nearly one-fourth.
Similarly, a 50-year-old couple, each earning $20,000 per year, would receive $5,114 less in benefits each year if they marry or remain married. By divorcing and then living together, the couple could increase its income by more than $50,000 over a decade.
A 60-year-old husband and wife, each with an income of $15,000, would pay over $4,000 per year if they remain married. Put in other terms, the government would offer an annual bonus of $4,212 if the couple divorces and then cohabits.
The tax tables on the ObamaCare subsidy are on the Heritage website. If ObamaCare is not repealed, divorce attorneys will find themselves in a booming industry.