Maybe we should treat people who are cohabitating the same as we do people who are formally married, or maybe we should go back to counting people as individuals like we did in the past. You are going to find people who don’t like any one of the options. – Robert Williams, fellow at the Tax Policy Center and the Urban Institute
At the low end of the economic ladder, where two incomes are often needed simply to hold a family's nose above water, Obamacare has embedded a perverse paradox, critics argue, one that penalizes a couple for being married.
A couple earning $20,000 a year each would receive over $4,000 more in health care subsidies under the Affordable Care Act if they lived together than if they were married — a difference of more than 10 percent of their income.
The Atlantic drew the so-called marriage penalty into the spotlight last week in a profile of a married couple considering divorce to better afford health care.
"It's a system that preferentially rewards the exact same people for not being married," said Robert Rector, a senior research fellow at the conservative Heritage Foundation. The marriage penalty is not a case of sloppy bill drafting, Rector argues, but rather a conscious policy decision. "I wrote about it at the time, there was press coverage, and the House Democrats essentially said they didn't care."
Current income tax policy uses separate schedules to steer a middle ground between favoring individuals and favoring married couples, Rector said. With the new health care law, he said, "It's as if they took the income tax code and took away all the tables that relate to married couples."
In Rector's mind, the question of whether couples would, on the margin, be less likely to marry is missing the point. It's the sharp inequity that is troubling. "They are saying that not many people will divorce because of it," Rector said, "but actually in many cases you are talking about reducing the net income of a couple by as much as 10 percent, repeatedly, year after year, because they are married."
Rector sees the policy as an "act of ideological hostility," made possible by the fact that married couples tend to vote Republican, while singles and those who cohabitate more often lean toward Democrats. CNN exit polls in 2012 showed that while 56 percent of married voters supported Romney, just 35 percent of unmarried voters went with the Republican candidate.
The tension between marriage and individual status has long bedeviled federal policy, agreed Roberton Williams, a fellow at the Tax Policy Center and the Urban Institute. It was not until after World War II that married couples were allowed to file taxes jointly, Williams said, and in the 1960s there was a backlash led by singles who felt they were being treated unfairly.
A kind of truce
The result in tax policy is a kind of "truce," according to Williams, with some policies favoring married couples while others penalize them. The earned income tax credit — which redistributes to the poor by giving cash to those with low incomes but no income tax — is just one of those where married couples are penalized.
Williams also notes that perverse outcomes are possible no matter how the law is written. A married couple, with one spouse earning a million dollars a year and the other not working, would be eligible for subsidies if they were treated separately, he notes.
"Maybe we should treat people who are cohabitating the same as we do people who are formally married," Williams said, "or maybe we should go back to counting people as individuals like we did in the past. You are going to find people who don't like any one of the options."
A GOP agenda?
Targeting singles makes sense, argues Igor Volsky, managing editor of Think Progress, a publication of the liberal Center for American Progress, "if you are targeting government assistance to people who need it the most."
Volsky argues that those who are poor and uninsured tend to be disproportionately single, and that the economies of scale of having two adult wage earners in the home should be taken into account.
Volsky argues that if you take two couples, identical in every other respect, with the only difference being one is married and the other is cohabitating, it makes sense to favor the latter with subsidies.
"If you are a married couple, the understanding is that you pool your resources together from two people and as a unit you can afford more than roommates or people who don't have that kind of arrangement," Volsky said.
Volsky also argues that it would cost billions more in subsidies if they were to be extended to married couples. Republicans do not want to spend more on health care subsidies, he said.
Williams believes that Democrats and their allies, such as Volsky, are reluctant to acknowledge the illogic of the distinction between marriage and cohabitation because they fear that the critiques of Obamacare are part of a larger agenda to destroy the law.
"I don't think anyone would argue that the ACA is the best program that we can devise," Williams said. "I think the president and the Democrats would be happy to open the whole thing up again if they didn't fear they would lose a lot of baby with the bath water.
"If you turn back the clock about 20 years, Williams said, "the Heritage Foundation was pushing exactly the kind of thing you have in Obamacare. What is different now than then? Well, someone else is proposing it."