Arnold Kling on means-tested benefits

Arnold Kling links to new working papers by Chicago economist Casey Mulligan but, like others, merely reports Mulligan’s conclusion that marginal payroll taxes go up as a consequence of Obamacare. I would like to know how Mulligan estimates implicit payroll taxes to reach this conclusion, but haven’t the time or patience to figure it out for myself. Arnold has not looked at the caculations, but he does provide general background that is useful for analysing means-tested benefits.

[N]ew NBER working papers by Casey Mulligan … point out that marginal tax rates go up under Obamacare. I have not read the papers, but I assume that he counts as an increase in the marginal tax rate the fact that you lose out on subsidies as your incomes goes up. That is legitimate economic analysis, but try to do [sic] satisfy the following:

1. Use “means testing” in order to provide a significant benefit that is aimed at the poor.

2. Keep the marginal tax rate low.

3. Keep the budget cost low.

Those of us on the right tend to argue separately for all three. But collectively, they are not so easy to satisfy. (My undergraduate economics professor, Bernie Saffran, pointed this out, and I have not forgotten it.)

Arnold Kling, “Gotcha!“, askblog, 7 September 2013.

Regarding healthcare, the conservative solution (at least in the United States) is simple: government should not provide any healthcare to citizens. With no benefits, there will be no means test, and no cost to taxpayers. Taxes (implicit and explicit) to finance healthcare will be zero. Those too poor to pay for their own medical care should seek financial support from their church or another private charity. This solution would not appeal to Arnold, a self-styled “bleeding-heart” libertarian.

I hope that Arnold finds time to read Mulligan’s NBER paper, so that he can explain it to the rest of us. My own, admittedly quick, reading of the paper left me confused.



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