How ObamaCare Wrecks the Work Ethic

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A new wave of redistribution will arrive in America on Jan. 1, primarily thanks to the Affordable Care Act. The president's health-insurance plan forces those who hire, work and produce to pay full price for health care, while creating generous discounts for practically everyone else.

This second redistributionist wave of the Obama era will follow a first wave of tax hikes, additional unemployment benefits, food-stamp expansions, waived work requirements for welfare benefits, etc. These measures were supposed to be temporary, intended to help people cope with the recession. The recession officially ended in mid-2009, but many of the administration's measures continue.

Regardless of whether redistribution is achieved by collecting more taxes from families with high incomes, levying employment taxes on businesses, providing more subsidies to families with low incomes, or all of the above, an essential consequence is the same: a reduction in the reward for working. In a National Bureau of Economic Research paper issued in August, I quantify the combined effect of the two redistribution waves and higher payroll taxes on the financial reward for working.

The chart nearby shows an index of marginal tax rates for non-elderly household heads and spouses with median earnings potential. The index, a population-weighted average over various ages, occupations, employment decisions (full-time, part-time, multiple jobs, etc.) and family sizes, reflects the extra taxes paid and government benefits forgone as a consequence of working.

The 2009-10 peak for marginal tax rates comes from various provisions of the "stimulus" programs in the American Recovery and Reinvestment Act of 2009 and the extension of unemployment benefits to 99 weeks in some states. At the end of 2012, the marginal tax rate index reached its lowest value since 2008: 43.9%. A little over a year later (January 2014), the index will be close to 50%, driven up by the expiration of the payroll tax cut and multiple provisions of the Affordable Care Act. The ACA employer penalty, delayed until 2015, adds more than a percentage point in that year alone, while other ACA provisions strengthen their disincentives for the various reasons cited above.

By 2016, the index exceeds 50%, which is at least 10 percentage points greater than it was in early 2007.

The 50% rate is even higher than the rates that prevailed when the so-called Recovery and Reinvestment Act's redistribution was at its peak. Without new federal legislation and a departure from the strategy of forcing workers and employers to finance everyone else's health care, the new 50%+ rate will not be a peak, but rather a new normal for tax rates.

To appreciate the added burden that the two redistribution waves put on the labor market, look at what people keep, on average, when they decide to retain or accept a job, or to take on a longer work schedule. Before the recession, a decision to work would benefit public treasuries by an amount equal to 40% of the compensation from the job. The worker and his family got the other 60%.

In the years 2015 and beyond, full-time workers with median incomes will keep only half of the compensation created by their decisions, with the other half going to the government in the form of additional taxes and savings on subsidy payments. By keeping 50% rather than 60%, workers will find that the reward for holding a job will have fallen a damaging 17%.

Advocates of redistribution try to perpetuate the income-maximization fallacy that business continues as usual as long as tax rates are less than 100%, because receiving even 1% of your compensation is supposedly better than getting no compensation at all. But even if full confiscation were the only way that taxes would depress the labor market, recall that the nearby chart is just an average: The average rate rising to 50% and above involves millions of people with rates far higher.

America absolutely must have taxes and safety-net programs, even though they reduce the reward for working. But advocates for the recent program expansions have failed to acknowledge that redistribution necessarily increases marginal tax rates and contracts the labor market.

Don't be surprised if the second redistribution wave coincides with a recessionary double-dip.

Mr. Mulligan is a professor of economics at the University of Chicago and the author of "The Redistribution Recession" (Oxford, 2012).