Obamacare's Marriage Penalty
NEW YORK ( MainStreet) Being married is expensive - and not just for the usual reasons. According to the Competitive Enterprise Institute's Hans Bader - and others - it is an expensive proposition as far as the Affordable Care Act (ACA) premiums and taxes are concerned.
Bader maintains that there is a discriminatory treatment of married versus unmarried couples. For proof he cites the Kaiser Family Foundation's (KFF) ACA premium calculator.
MainStreet ran two scenarios through the KFF calculator and learned that the marriage premium penalty is not always there. When it is, though, it is a significant one.
You don't need a calculator to determine the tax penalty, which is a constant. Married couples are penalized because of the way healthcare is indexed. This would create a significant burden to a married professional Millenial couple.
According to the KFF calculator, a married couple, aged 55, living in Pennsylvania, who earned a combined total of $100,000 per year, can buy a Silver plan for $12,570 per year, with a maximum co-pay of $12,700 annually or about 30% of the typical total annual medical costs for such consumers, according to an actuarial table.
But if that couple were divorced and one were making $30,000 per year and the other $70,000, the combined cost would be $5,330 and a maximum co-pay of $12,700. The taxpayers would foot $307 of the bill subsidizing the premium.
The $30,000 per year spouse would pay $2,512 and a maximum co-pay of $6,350. The $70,000 per year spouse would pay $2,818 and a maximum co-pay of $6,350.
This represents a savings of $7,240 per year - just by living together without being married.
The second scenario, though, revealed that there is not always a penalty. A married couple, ages 40 and 36, with two kids both younger than 21, earning a combined $200,000 per year, would pay, using a national average, $8,290 per year with a maximum co-pay of $12,700 annually.
Now if this couple divorced and both their incomes were the same but the wife got custody of the two kids, this is how their costs would change: he would pay $3,240 per year plus a maximum co-pay of $6,350. She would pay $6,318 with a maximum copay of $12,700. So their combined premium amounts are $9,558.
This is $1,268 per year more if they divorced than they would be paying if they stayed married. So in this case, the ACA provides an economic incentive to stay married. albeit the benefit is not quite the whopping amount the two 55-year-olds would receive by splitting up.
Another issue is that of the "high-income" tax. The ACA creates a new 0.9% tax on wages - and a 3.8% tax on unearned income - that exceeds certain amounts.