The Marriage Tax and the Labor Tax

I received this question by email

If households respond to -- what I understand is -- a steep marriage penalty embedded in the subsidy formulae by postponing marriage or even by divorcing, would not this further broaden the effect of the Act in the labor market. In the limit, if every household sought subsidies under such an "income splitting" basis, would not more households qualify, and would not more households be influenced over a larger range of the income curve than even your study assumed? And thus would not the impact on the labor market be even larger [than calculated here]?

My answer:

It depends, even though I agree that the ACA includes a steep marriage tax as well as its steep taxes on labor income. My labor income MTR estimates are based on, among other things, estimates (from the CBO and others) of the number of people participating in the ACA exchanges. Your email provides a good reason to suspect that exchange participation will ultimately exceed the estimates. There are other reasons too.

Table 8 in my paper shows what would happen if one increased the exchange participation estimates -- see esp. the "exchange take-up" and "percentage of ESI moving to exchanges" rows.

But if the exchange participation estimates are accurate (maybe other factors offset the one you mentioned), then my headline estimates (Table 1) are fine even though the ACA reduces the incidence of marriage.