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Labor Market Effects of the Affordable Care Act: Evidence from a Tax Notch

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July 2017

Written by: Kavan Kucko, Kevin Rinz, Benjamin Solow

Working Paper Number:

carra-2017-07

Abstract

States that declined to raise their Medicaid income eligibility cutoffs to 138 percent of the federal poverty level (FPL) under the Affordable Care Act (ACA) created a "coverage gap'' between their existing, often much lower Medicaid eligibility cutoffs and the FPL, the lowest level of income at which the ACA provides refundable, advanceable "premium tax credits'' to subsidize the purchase of private insurance. Lacking access to any form of subsidized health insurance, residents of those states with income in that range face a strong incentive, in the form of a large, discrete increase in post-tax income (i.e. an upward notch) at the FPL, to increase their earnings and obtain the premium tax credit. We investigate the extent to which they respond to that incentive. Using the universe of tax returns, we document excess mass, or bunching, in the income distribution surrounding this notch. Consistent with Saez (2010), we find that bunching occurs only among filers with self-employment income. Specifically, filers without children and married filers with three or fewer children exhibit significant bunching. Analysis of tax data linked to labor supply measures from the American Community Survey, however, suggests that this bunching likely reflects a change in reported income rather than a change in true labor supply. We find no evidence that wage and salary workers adjust their labor supply in response to increased availability of directly purchased health insurance.

Document Tags and Keywords

Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the text, highlighting the most significant topics and trends. This approach not only enhances searchability but provides connections that go beyond potentially domain-specific author-defined keywords. :
labor, expenditure, incentive, subsidy, insurance, federal, tax, welfare, enrollment, poverty, irs, medicare, healthcare, medicaid, uninsured, exemption, insurer, taxpayer, taxation, subsidized

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The model is able to label words and phrases by part-of-speech, including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are identified to contain references to specific institutions, datasets, and other organizations. :
Internal Revenue Service, National Bureau of Economic Research, Supreme Court, American Community Survey, Earned Income Tax Credit, Medicaid Services, Centers for Medicare, Person Validation System, Federal Poverty Level, Supplemental Nutrition Assistance Program, Center for Administrative Records Research, Person Identification Validation System, Center for Administrative Records Research and Applications

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