An Unintended Consequence of Obamacare: The Underground Economy

Unintended consequences accompany well-meaning government legislation. Welfare for single parents? What a compassionate idea! I know a guy whose daughter was tired of work, did the math, and went out and got pregnant so she would qualify. Of course, there was no husband, and no father in the child's life. The government probably didn't see that coming.

With Obamacare, there's a predictable consequence that I haven't seen comment on. And that's the effect the subsidy will have on reported income. Here's the set-up:

Under the Affordable Care Act, if your 2014 income is between 138 and 400 percent of poverty level for your household size, you can purchase health insurance on a state-run exchange (such as Covered California) and receive a federal tax subsidy to offset all or part of your premium.

I understand that the effects of being a dollar above the cut-off can be thousands of dollars of lost subsidies. What this means is this: Some people will simply work less to keep below the cut-off. However, the unscrupulous will resort to the underground economy, doing work on the side and hiding income to maintain eligibility for the subsidy. A vile practice, yes, under-giving on taxes so you can over-get on taxpayer-paid handouts, but you can count on it.

Here's my prediction: Obamacare will increase the underground economy, further undermining the moral fiber of America, denying the federal government revenues it desperately needs while increasing the subsidy payouts it would otherwise be paying.

And that's the way the unintended Ball bounces.

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