Study: Obamacare Penalizes Americans Who Work Full-time

Penny Starr | October 11, 2016 | 3:25pm EDT
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( – A new study on the Affordable Care Act, or Obamacare, produced by the Mercatus Center at George Mason University shows that the health care law penalizes Americans who work full-time, will reduce the number of full-time workers, and rewards those who work less.

“The ACA’s employment taxes create strong incentives to work less,” the study, The Affordable Care Act and the New Economics of Part-Time Work, states. “The health subsidies’ structure will put millions in a position in which working part-time (29 hours or fewer, as defined by the ACA) will yield more disposable income than working their normal full-time schedule.” 

The study’s introduction states: “Starting this year, the United States’ working population will face three major employment disincentives resulting from the very benefits the Affordable Care Act (ACA) provides: (1) an explicit tax on full-time work, (2) an implicit tax on full-time work for those who are ineligible for the ACA’s health insurance subsidies, and (3) an implicit tax that links the amount of available subsidies to workers’ incomes.”

The introduction further says that the study “advances the understanding of how much these ACA taxes will reduce overall employment, and why. It concludes that the reduction will be nearly double that projected by previous analyses. Labor markets ultimately will reduce weekly employment per person by about 3 percent—translating to roughly 4 million fewer full-time-equivalent workers.”

“Much of the ACA’s tax effect resembles unemployment insurance: both encourage layoffs and discourage people from returning to work,” reads the report. “The ACA’s overall impact on employment, however, will arguably be larger than that of any single piece of legislation since World War II.”

Under the heading “Distorting the Workweek,” the study explains that the ACA is essentially a tax on employment.

“The ACA imposes a $2,000 penalty for each full-time employee imposed on large employers (generally those with 50 or more workers) that do not offer health insurance,” reads the report. “Due to this penalty’s unfavorable tax treatment, it is effectively a $3,000 employment tax and can be expected to reduce full-time employment.”

The study compares two hypothetical workers to illustrate its point:

“Each worker represents the same hourly cost to the employer, but one works full- time (in this case, 40 hours per week) and one part-time (29 hours per week). In addition to salary, the full-time worker receives a partial employer subsidy for health insurance.

President Barak Obama signs the Affordable Care Act into law on March 23, 2010.  (AP) 

“The part-time worker has lower total compensation, mainly due to fewer hours worked, and no employer-sponsored health insurance, but is eligible for government-subsidized health insurance through the ACA’s exchange.

“After accounting for taxes, health expenses, and work expenses (e.g., child care and commuting), this part-time worker actually nets more per year than the full-time worker.”

The study states that some 33 million American workers’ eligibility depends on their employment status.

“In any month they work part-time or not at all, they can obtain subsidized coverage; in any month they work full-time, they do not qualify for these subsidies,” the study reports. “Members of this group would, on average, have to work an additional 5.5 hours per week to make up for the subsidies they forgo by working full-time.”

“The study does not assume or predict that employment and work schedules are especially sensitive to taxes,” reads the report. “Rather, the study’s results derive from the sheer size of the taxes that the ACA has created."

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