Friday, November 8, 2013

Six-Figure Poverty

On the floor of the House of Representatives in May, Ms. Jackson Lee explained that "the Affordable Care Act is to lift your boat" and is for those in "poverty" in which she included those who are "poor," "low-income," and "working middle class."

The Affordable Care Act provides subsidies for Americans with incomes at or below 400 percent of poverty ($94,200 for a family of four). The middle class would include those with incomes from one to four times the federal poverty level (FPL). A look at US Household income or a distribution chart shows that this includes at least 75 percent of Americans.

Do the American people really believe that three quarters of the country are in some form of poverty now?

Some of my friends argue that in some parts of the country these thresholds indeed make sense, and it is expensive to raise a family. And the question there must be asked, how much of that difficulty is due to the high level of taxation? Why do we need subsidies to make up for the high number of taxes?

Looking at that in reverse, why should we be taxed so that the government can give it back to us? The answer is either wealth redistribution or behavior modification. For a free people, behavior can end up modified in unintended ways.

Those near the dividing thresholds find ways around the income discrimination. Some people in the middle class have decided to get their official income under 400 percent of poverty by diverting income to retirement in order to qualify for subsidies.

The Administration now wants to do the heavy lifting for them by raising the 400 percent threshold even higher to include even more people among those who get subsidies.

With 75 percent of America already considered to be in some form of poverty, how close do we want to get that number to all but the top 1% (or 0.01%)? Americans with incomes at 15 times FPL are in the top 1 percent.

What impact will this have on our national debt and deficit?

Updated 12/29/2013 with FPL detail and link

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