Business opportunity: software to calculate welfare cliffs?

Today’s New York Times has an article “Health Care Law Frustrates Many in the Middle Class” about Obamacare. Amusingly this is summarized on the front page with “While the Affordable Care Act clearly benefits those at the low and high ends of the income scale, many middle-class Americans don’t qualify for subsidies, and are facing steep premium prices.” How is that that people at the “high ends of the income scale”, who don’t get any subsidies and must pay a new 4% income tax surcharge, receive “clear benefits”? The authors of the article explain that rich people are different from the rest of us and  don’t mind paying more for the same stuff (“rich people can continue to afford even the most generous plans”).

More substantively, the article talks about a family in New Hampshire that makes $100,000 per year but if they were able to ask their employer for a cut in hours so that they made $94,000 per year they would receive $6000 in subsidies from federal taxpayers.  Given that the $6000 pay cut would be pre-tax and much of their health care spending is after tax, these folks would be financially better off working fewer hours and receiving lower wages. Not to mention the fact that the family would be emotionally better off if the wage earners had more leisure time.

The phenomenon of welfare cliffs is well-known for lower income people. This chart shows that a $29,000 job can yield a better lifestyle than a $69,000 job, for example. This is even more dramatic in cities with high rents, such as Cambridge, Massachusetts, where preserving one’s low income status can result in $50,000 per year or more in housing subsidies alone (equivalent to pre-tax earnings of $90,000 per year?).

With Obamacare, though, folks who earn more than average may nonetheless face a welfare cliff. Does this present a business opportunity? What about a web or phone app that takes into account the various subsidies available from local, state, and federal governments and advises the user on the after-tax and after-welfare effects of pay increases and decreases from their current salary? This is now a lot more complex than it was before Obamacare and it isn’t a simple matter of going to ADP.com to use a pre-tax/after-tax calculator.

[The other amusing thing about the article is that they cite "Experts consider health insurance unaffordable once it exceeds 10 percent of annual income. " But they don't explain how it is that adding layers of complexity and bureaucracy can somehow make it affordable for a nation to shovel 18 percent of its GDP into the maw of the health care industry! (and it will be "close to 25 percent of GDP in 20 years" according to this fall 2013 Brookings Institute paper)]

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