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PPACA may pack bigger punch than RomneyCare

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A University of Colorado economist says new Patient Protection and Affordable Care Act requirements could hit employers about 12 times as hard as its Massachusetts predecessor.

Some PPACA defenders have pointed to the relatively modest effects of the RomneyCare employer and individual mandates as evidence that it would only be a bump in the national economy.

But the economist, Casey Mulligan, concludes in a working paper circulated by the National Bureau of Economic Research that RomneyCare imposed the equivalent of an increase of just $20 per month, or 0.4 percent of median earnings potential, on the typical Massachusetts labor income tax rate.

The RomneyCare increase amounts to a big implicit tax on a small fraction of the Massachusetts population plus a small employer penalty, Mulligan writes.

PPACA could lead to the equivalent of a 4.9 percent increase in the typical labor income tax rate at the national level, Mulligan estimates.

But it would have a much larger effect because the employer penalty would be $2,000 per affected employee. In Massachusetts, the penalty is just $295.

But for a complete estimate of the effects of PPACA, economists need to know how it will influence overall behavior, Mulligan says.

“Health impacts, for example, may well be valuable enough to offset significant labor market distortions,” Mulligan says.

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