The Corner

Insurance Mandates a ‘A Disincentive to Earn More’

Tyler Cowen has a good piece on insurance mandates in today’s NYT. Cowen notes an argument against mandates that’s been largely overlooked:

A subtler problem is what economists call “implicit marginal tax rates.”

The fiscal reality is that not all income groups can receive equal subsidies; as a family earns more, its subsidy would probably decrease, eventually falling to zero. But then we are taking money away from the poor as they climb into higher income categories. This is a disincentive to earn more, and the strength of the disincentive increases with our initial generosity. For many people, the health insurance aid would phase out when food stamps, housing vouchers and the earned income tax credit also end and the personal income tax kicks in.

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