Uncovering the True Impact of the Obamacare Tax Credits: Increases the Deficit, Expands Welfare through the Tax Code, and Implements a New Marriage Tax Penalty

October 27, 2011

85 percent of tax filers who claim Obama plan subsidy will end the year with zero or negative income tax liability

(WASHINGTON) – President Obama’s health care plan creates a new marriage penalty that discriminates against families and many workers with employer-sponsored insurance.  The law will also remove as many as 8.1 million filers off the tax rolls.  After receiving the President’s new refundable tax credit, some 11.3 million people will have negative income tax liability and will no longer pay the cost of government by contributing federal income taxes.  Those conclusions are contained in a new report released today by the House Oversight Committee to coincide with a subcommittee hearing on the same topic.

The Oversight Committee report is based on staff analysis of data provided to Chairman Darrell Issa by the Joint Committee on Taxation (JCT).  Combined with data from the Congressional Budget Office (CBO), the report concludes that married couples will receive only 14 percent of the tax credits authorized by the Patient Protection and Affordable Care Act (PPACA).  At most, two million married couples (out of nearly 60 million married couples nationwide) are projected to benefit from the health insurance tax credit in any year through 2021.  Nearly half of the beneficiaries of the tax credit will be single individuals without any dependent children while most of the other beneficiaries will be single parents.

The report also points out that 85 percent of filers who claim the tax credit will end the year with zero or negative income tax liability, and because the credit is refundable, nearly all 11.3 million of these filers will have negative income tax liability.  JCT estimates that in 2020, 14 million tax filers will claim the credit but only about two million of these households will have positive income tax liability after benefitting from the credit.

“Under President Obama’s health care plan, the tax code will continue to treat otherwise identical individuals very differently—solely based on the source of their health insurance.  Many workers and employers will have a new incentives to drop employer-sponsored health insurance because of the sizeable tax credits created by this law.  This means that some families will have a tax filing benefit for not receiving health insurance, which could lead to dramatic market disruptions and ultimately increase the federal deficits as these workers turn to Obamacare rather than traditional employer-sponsored plans,” Chairman Issa said.

“This law is a textbook case in the law of unintended consequences.  In their rush to fulfill President Obama’s campaign rhetoric, they rushed a flawed bill through Congress. This report makes clear the cost to our deficit and the negative impact on married families from this law,” Issa added.

A copy of the report is available here; a link to the related subcommittee hearing page is here.

Related Documents

Oversight Report