Marginal Tax Rates Facing Low– and Moderate–Income Workers Who Participate in Means–Tested Transfer Programs

2007/06/01 by Stephen D. Holt, Jennifer L. Romich · 2 citations
Social Sciences · Business, Management and Accounting · Economics, Econometrics and Finance · #Gender, Labor, and Family Dynamics #Financial Literacy, Pension, Retirement Analysis #Fiscal Policy and Economic Growth

paper · doi:10.17310/ntj.2007.2.05

Abstract

The combination of a progressive tax system with credits for low-income workers and means-tested transfer programs can create high marginal tax rates (MTRs) on earned income. We document the extent and distribution of statutory and actual MTRs for Wisconsin households with earned income in 2000 using a unique data set of merged tax, transfer program, and wage data. Nearly a quarter of unmarried tax filers with two or more dependents face MTRs of 50 percent or greater. Households between 100 percent and 250 percent of the federal poverty threshold and those using multiple means-tested programs are more likely to face high rates.

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