NCOS Technical Note D2: Joint Income–Wealth Incidence Under NCOS and the Legacy Architecture

Companion to NCOS Working Paper v1.0 · Reference calibration R_max 10%, m 6.00 ($1M) · ncos.world · November 2026

Abstract

Income deciles alone misdescribe a system whose primary base is net wealth. This note compares federal burdens under NCOS and current law on a joint income × wealth basis, using the household-type model embedded in the working paper (§13.5, Table 13.2). At the reference calibration (R_max 10%, inflection $1M), 71.0% of US households pay less than under current law. Gains are concentrated among working households, especially those whose employer premiums become wages when healthcare is detached from employment. Burdens rise for households whose wealth is high relative to income, including asset-rich retirees above roughly $230K–$320K of net wealth.

Revision note (October 2026). This edition supersedes the April 2026 note, which used the earlier calibration (R_max 12%, inflection ≈ $241M), reported 93% of households paying less, and omitted healthcare. The comparison now includes the S11 contribution, the S12 household health bill, the release of employer premiums into wages, the S24 and S25 credits, and retiree incomes below working-age incomes.

Correction (October 20, 2026). An earlier v1.0 edition of this note reported 77.7% of households paying less and a $1.38M breakeven. Three errors in the model’s comparison were found and corrected: under the Parity Protocol the worker’s gross wage falls from W to W′ = W × 1.0765 ÷ (1 + S2), so the gain is W′ − 0.9235 × W rather than the full 7.65% employee payroll tax; the former employer premium reaches wages through the same protocol; and payroll tax in the current-law comparison now applies to wages only, not to retirees’ pensions and Social Security. Revenue, outlays and the debt path are unchanged.

1. Method

Current-law burden: federal income tax, employee payroll tax on wages, annualized capital gains and estate tax, and the household’s health premium (worker share, Medicare premiums, or individual-market premium).
NCOS burden: S1 civic obligation net of S24 (retirees, 60% qualifying; faded out between $10M and $50M by the Standard High-Wealth Taper) and S25 (retirement-account holders, weighted by holder share), plus S11, plus the S12 household bill, plus the Parity Protocol wage adjustment (W − W′), less the former employer premium received as wages after the S9 transition through the same protocol (≈ $12,100–$12,300 for an employer-coverage household).
Not shown: S2 (paid by the employer); S27 Family and Work Credit (reduces burdens further for low-wealth working families with children); out-of-pocket health costs; Growth Dividend effects.
Wealth distribution: SCF 2022, 15 bins; household composition by bin as documented in the working paper. Wages are a bin-specific share of working households’ income (95% in the lower bins, falling to 15% at the very top); retiree income carries no payroll tax.

2. Six stylized households

Type	Income	Net wealth	Household	Current federal burden*	NCOS burden†	Net change
A — High-Income Accumulator	$2.00M	$50M	no employer coverage	$1.13M	$4.93M	+$3.79M
B — High-Income, Modest Wealth	$400,000	$2.00M	employer coverage today	$110,776	$140,592	+$29,816
C — Wealth-Rich, Income-Modest	$80,000	$10M	no employer coverage	$46,288	$869,082	+$822,794
D — Middle America	$75,000	$300,000	employer coverage today	$19,859	$3,384	−$16,475
E — Working Household	$40,000	$30,000	employer coverage today	$13,196	−$10,103	−$23,299
F — Retiree	$45,000	$1.50M	retiree (head 65+)	$13,645	$79,376	+$65,731

* Current law, FY2024 basis. † Long run, after the S9 employer bridge. Account-holder and non-holder results weighted by the SCF holder share at that wealth. [Estimate]

Components of the NCOS burden

Type	S1 (gross)	S11	S12 health bill	Parity Protocol wage adjustment	Former employer premium as wages
A	$4.59M	$290,115	$21,516	$37,363	—
B	$120,967	$9,514	$13,680	$13,536	$12,063
C	$804,396	$53,008	$17,862	$830	—
D	$9,694	$1,226	$4,825	$1,976	$12,239
E	$312	$98	$1,041	$815	$12,315
F	$84,289	$6,985	$6,676	—	—

3. Reading the results

Types D and E (working and middle households) are the largest gainers: income tax and the employee’s payroll tax disappear, S1 is small, and — for families with employer coverage today — the former employer premium arrives as wages while the S12 bill is capped by the affordability ceiling.
Type B (high income, modest wealth) pays modestly more — about $30K a year at $2M of net wealth and $400K of income. For a working family with employer coverage, the breakeven wealth is approximately $920K (about $690K for a family without a retirement account).
Types A and C pay substantially more. At the reference calibration S1 is 8.0% at $10M and 9.2% at $50M. Type C — wealth-rich and income-modest — faces an S1 obligation many times its current federal burden; the NBUSA liquidity channel and the Payment Flexibility Protocol exist precisely for this case, and S6 applies to verified working land.
Type F (asset-rich retiree) pays more than today despite S24 and Medicare-level healthcare continuity, because S1 at $1.50M is about 5.6% and retiree incomes, and therefore current income taxes, are low. This is the principal distributional pressure point of the reference calibration.

4. Distribution of net beneficiaries

Across all households, 71.0% pay less than under current law, above the 68.2% Sigma Mandate threshold by about 2.8 points. The measure counts direct household cost only; system-wide gains such as the Triple Dividend and a falling debt burden are not included, so it is a conservative measure. Nearly all households below the 60th wealth percentile gain. Above it, outcomes depend on household type: families with employer coverage today continue to pay less up to about $920K; retirees become net contributors at roughly $230K–$320K, and working families without employer coverage at roughly $350K–$410K of net wealth (the higher figure in each range for households with a retirement account; working paper Table 13.2).

5. Sensitivity

Inflection m: raising m protects middle-wealth households and requires a higher R_max for balance (working paper §4.2a grid).
Employer pass-through: if only half of former premiums reach wages, employer-coverage families’ gains shrink by roughly $6,100 a year; the extended Benefit Equity Certification is designed to prevent this.
Retirees: the S24 discount (D_max) and the 50+ healthcare continuity are the levers for Type F.

6. Conclusion

NCOS is strongly relieving for working and middle households, modestly more demanding for high-income households of modest wealth, and substantially more demanding for households whose wealth is high relative to income. Full microsimulation across all income and wealth fractiles remains the highest-priority empirical task for a future version.

Technical Note D2 — NCOS Working Paper v1.0 companion document · Cross-reference: Working Paper §13.5, §13.5a, §15; Technical Note D1 · ncos.world · November 2026