More Marginal Tax Concerns over Health Care Reform

Greg Mankiw comments on the CBO analysis  of the House's version of health care reform.  In a nutshell, the House bill establishes significantly higher marginal tax rates than the Senate bill.  The Senate Bill imposes a marginal tax rate of roughly 23% on low to moderate income Americans, and the House bill increases this to 32%.

As I discussed in an earlier post (about the Senate bill), this rate, when added to other marginal taxes on that tax group, which range from 28% to 50% depending on how you do your math (and make your assumptions), the House bill will impose a marginal tax rate of somewhere between 60% and 82% on working class Americans.

Economists disagree on how people react to such high tax rates.  Mankiw discusses it here.  One can certainly guess that this may be a disincentive towards increasing your income.  Or reporting it.  Mankiw concludes, and I agree:

"None of this necessarily means that health reform is not worth doing. President Obama’s push for reform is premised on the belief that access to good health care should be a right of all Americans — a proposition better judged by political philosophers than economists. But we should not forget the cost of translating that noble aspiration into practical policy."