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Obamacare Will Reduce Income Inequality, but Quietly Obamacare Will Reduce Income Inequality, but Quietly

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Obamacare Will Reduce Income Inequality, but Quietly

Traditional measures of income don’t account for health insurance, but a new study shows the law will greatly improve the fortunes of America’s bottom fifth.


Addressing the wealth gap is one of President Obama's goals—and the Affordable Care Act brings low-wage earners a step closer toward income equality, a new study finds.(Olivier Douliery-Pool/Getty Images)

As the president prepares to sign an executive order raising the minimum wage for some federal contractors, another of his signature initiatives is quietly closing the income disparity in America, a new study finds.

The Affordable Care Act will boost the average incomes of the bottom fifth of wage earners, according to a Brookings Institution report, by nearly 6 percent in 2016.


Health insurance premium assistance and expanded Medicaid coverage are two primary factors contributing to the rise, the report says. Both provisions target low wage earners, and the cost of the programs are offset by taxes distributed across the population.

Such a "redistribution of wealth" has been demonized by Republicans, but more than $1 trillion will be collected from high- and middle-income earners to be made available as subsidies for people earning below 400 percent of the federal poverty line—a big step toward making income more equal in the U.S. Payroll taxes and the "Cadillac" tax on expensive health insurance plans are two Obamacare provisions that target the highest wage earners in the country.

But low-income, elderly, and minority Americans will also be adversely affected by cuts to the Medicare program, as well as by the decision by roughly half of states to opt out of Medicaid expansion. It's partly why the bottom tenth of wage earners will only see an average income rise of roughly 7 percent as the law takes effect.


"The Affordable Care Act does not do a lot for the bottom decile because we've already taken care of the bottom decile," said Marilyn Moon, director of the nonprofit, nonpartisan American Institutes for Research Center on Aging. "What it does is fill in the benefits for more Americans at the bottom."

To read the complete study, click here.

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