One of the most destructive parts of Obamacare is set to be enacted this fall. At that time, every American will need to tell the IRS how much they expect to make the next year. This, in turn will determine the supplement each person gets for health insurance.
While this is probably a necessary step (how else would the government know how much to send you?), the issue comes at the end of the year. If you guess you will make less than you actually do, the IRS will send you a big bill because you will have received too big a supplement. There will may be interest and penalties attached, which no one will want to pay. The effects will therefore be as follows:
1. If people guess low, there will be a strong incentive for hourly workers to work less. This means people will avoid working overtime or may even take leave without pay near the end of the year if they are in danger of going over. They will also be more reluctant to take on overtime throughout the year. If people work less, there will be less produced, meaning products that do get produced will cost more and there will be fewer goods and services.
2. Small business owners will close down and not expand to keep their incomes below limits.
If a person is a small business owner, they may shut down for a few months near the end of the year, possibly laying off or furloughing employees when they do so. This will mean fewer jobs and fewer services near the end of the year.
3. It may be very difficult to get work done near the end of the year.
Private contractors are one business that has a strong ability to increase or reduce work. If a contractor gets more work early int he year than he expects, he may not take any other jobs later in the year that might push him over the limits.
4. There will be a lot of pay under-the-table and fraud.
Because collecting more than you expected will cause a penalty, expect there to be even more under-the-table transactions than there currently are since accurately reporting all income could cause penalties. There will also be the incentive to guess low in the first place since doing so will result in keeping more of your income. There have always been many who cheat on their taxes. Expect there to be even more people now.
In all there will be less productivity since the incentive is not to work. As less is produced, the price of things that are produced will be greater. This will mean that the standard of living for the middle class and the poor will decline.
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