Nothing spurs innovation, creativity and job growth like complex tax notches that incentivize fraud and the suppression of one's own income. Here is an excerpt from a longer piece up at
CATO demonstrating an absurd Obamacare subsidy and reporting loophole:
... To illustrate the Obamacare reporting loophole, consider the health insurance marketplace in Hialeah, Florida with two consumers. The first, Michael, is single, age 49, a non-smoker, and makes $46,000. The second, Lisa, makes $47,000 but is otherwise similar. Both find themselves ineligible for a taxpayer subsidy on HealthCare.gov and in searching more than 80 plans decide on a Humana Bronze plan with an annual premium of $4,092.
Where’s the reporting loophole? If Michael reports that he expects to make just $12,000 during 2015, he’ll ultimately pay $1,250 for his health insurance. If Lisa does the same, she’ll be on the hook for full amount. The Obamacare reporting loophole lowers Michael’s payment by more than $2,800, even though he wasn’t eligible for a taxpayer subsidy at all.
How does Michael profit from this? Obamacare offers sizable taxpayer subsidies to those with low income. Even so, many would have difficulty paying more than $4,000 in advance for health insurance. Instead, consumers can report their anticipated income and then have the subsidy advanced directly to the insurance company. Advanced reporting of income runs into a practical issue: Michael or Lisa might make an inaccurate report. If so, the advance subsidy would be incorrect. One might expect that Michael or Lisa would have to square up during tax filing season, a process the IRS calls reconciling. For single individuals like Michael with income under $46,680 (400% of the poverty line), the way in which the advance subsidy is reconciled encourages misreporting. Michael faces a repayment limit of at most $1,250, if the taxpayer advance to the insurance company was too large. In contrast, there is no upper limit on repayment for Lisa, because her income is above 400% of the poverty line. ...
