This is the Cato Daily Podcast for Monday, December 14, 2009.

I'm Caleb Brown.

The taxes you pay on the last dollar earned would change under Obamacare.

For low-income earners, the effects could be dramatic,

and Obamacare could cause many Americans to stop climbing the economic ladder.

That, according to Michael Cannon, Director of health policy studies at the Cato Institute.

The legislation before the House and the Senate would create new taxes and new government subsidies for low and middle income workers

that when looked at in combination, creates some serious disincentives for those low and middle income workers to climb the economic ladder,

to take that extra job, to go back and get an education or job training, to work extra shifts,

to take that promotion because for every dollar earned they'll be able to keep a very small share of that.

They will and sometimes a decreasing share of that

marginal dollar earned. Right now under federal law and even, I should say under the

Democrats legislation, no wealthy American would pay a federal

federal marginal income tax rate or a total marginal tax rate of even 50%. But under this legislation, low and middle income

earners would pay effective marginal tax rates that could reach up to 60, 70, 80%, and in some cases would even exceed 100%.

Which means if they earn an additional dollar,

they would not only lose that dollar, they would lose more than one dollar and be worse off financially.

The way that happens is through two mechanisms.

One of them is the individual mandate that these laws, or this legislation would create.

The way that Congress implements this individual mandate is it says that if you are a low-income worker, say maybe you make $15,000 for if you're a single

adult, you only have to pay a small percentage of your income toward the health insurance premiums that you're mandated by, that you would be mandated by law to purchase.

But as your income rises from $15,000 a year to 20, 25, 30, all the way to $45,000 a year,

...