Garance Franke-Ruta at the Atlantic profiles a couple who may well get divorced to qualify for subsidies under the Affordable Care Act. Separately, they’ll probably qualify for some subsidy; together, they don’t.
Nona and Aaron's 2012 income was higher than the 400 percent mark, but not by much. In New York City, that still doesn't take you very far for two people. If their most recent months of income are in the same range, they will get no help at all with buying insurance through the exchanges if and when they apply, according to the Kaiser Family Foundation and eHealth subsidy calculators. Premiums for the two for silver-level plans came in at $9,248 for the year.
But if they applied as unmarried individuals with something like their 2012 income, one of them would get at least $3,964 in subsidies toward the purchase of a plan, or possibly even be eligible for Medicaid, thanks to their uneven individual earnings that year. And if they fall below the 400 percent threshold, which Nona says they might this year, they could get substantial subsidies as a couple that are still worth less than what they'd be eligible for as individuals. These gaps are the marriage penalty.
This is not the only program that has this effect. Many tax subsidies phase out at higher income levels, such as IRAs and student loan deductions, and thanks to the tax deal cut over the fiscal cliff, higher-income earners will face more such phaseouts this year. Meanwhile, at the lower end of the income distribution, things are, if anything, worse. All the means-tested assistance -- Medicaid, food stamps, housing and child-care benefits -- start phasing out as you move out of “poverty” and toward the “lower middle class.” Those phaseouts constitute a very high marginal tax rate; it is quite possible for someone with a couple of kids to get a raise and thereby be worse off, or to achieve the same effect by marrying their live-in boyfriend.
I’m on the record as a marriage booster. Marriage is a happiness booster, it’s the best environment for raising kids, and it’s one of the most reliable personal finance programs around. It’s good for you, and good for society. Good policy should encourage marriage, not discourage it.
Conservatives support “family friendly” policies such as child tax credits, but they tend to give this issue shorter shrift. This dynamic plausibly plays a role in the disintegration of marriage among the less educated. You often hear that welfare helped to destroy fragile families by making men less necessary to their economic support. But welfare did more than that: It actually chased men away. A two-adult family was unlikely to be eligible for welfare, or ancillary benefits such as housing and Medicaid.
As long as benefits are means tested, that will be true. So should conservatives support more universal benefits? After all, the best way to keep people from being a burden on society is to keep them in intact families.
But universal benefit programs are hard to design; Obamacare was supposed to solve the Medicaid problem, but instead, it may just have moved the perverse incentives up into the middle class. Moreover, universal benefits are expensive; even Europe is finding it hard to support them, and they have more tolerance for high taxes. And that’s just the monetary cost. These programs also often undermine their own actuarial base. Generous welfare benefits discourage work, eroding the tax base that is supposed to support them. Even Social Security benefits seem to reduce the number of children people have -- children who are still very necessary to support the universal entitlement.
And of course, I haven’t even touched on the moral arguments: People have the right to the fruits of their own labors, and to what others are willing to give them voluntarily. And they have the right to give those things voluntarily to others, like their kids. Radical redistribution undermines many of the values -- hard work and private charity -- that conservatives want to promote.
But if full-frontal Denmark isn’t the way to go, conservatives need to think hard about their answers to the mess that is our current patchwork of benefits. I’ve seen suggestions here and there, but nothing, so far, that the movement has coalesced around. The liberal answer -- give subsidies to more people! -- creates plenty of problems. If conservatives can come up with a better one, they’ll have a cornerstone for the more populist conservative policy platform that Ross Douthat has been calling for. Maybe even for a more populist conservative policy platform that can win elections in 2016.