The effective marginal tax rate (EMTR) is the combined effect on a person's earnings of
income tax
An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...
and the withdrawal of
means test
A means test is a determination of whether an individual or family is eligible for government assistance or welfare, based upon whether the individual or family possesses the means to do without that help.
Canada
In Canada, means tests are use ...
ing of
state
State may refer to:
Arts, entertainment, and media Literature
* ''State Magazine'', a monthly magazine published by the U.S. Department of State
* ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, United States
* ''Our S ...
welfare benefits. The EMTR is the percentage of an extra unit of income (extra dollar, euro, yen etc.) that the recipient loses due to income taxes, payroll taxes, and any decline in tax credits and welfare entitlements.
Calculating the EMTR is typically very dependent on individual circumstances and involves a consideration of welfare withdrawal rules, income tax laws, low income tax offsets, tax rebates and the individuals tax and welfare status. As such tables showing EMTRs are rarely published. The net effect however is generally a higher effective marginal rate of tax than that suggested by income tax tables.
See also
*
Welfare trap
The welfare trap (or unemployment trap or poverty trap in British English) theory asserts that taxation and welfare systems can jointly contribute to keep people on social insurance because the withdrawal of means-tested benefits that comes with ...
References
External links
* http://melbourneinstitute.com/publications/reports/WebReport.pdf
* http://www.amp.com.au/group/3column/0,2449,CH34906%255FNI155234%255FSI3,00.html
{{DEFAULTSORT:Effective Marginal Tax Rate
Income taxes
Theory of taxation