We look at two key aspects of labour supply: financial incentives to take up or remain in employment commonly measured by replacement rates and/or participation tax rates (5)--and financial incentives to move from part-time to full-time employment--measured by
marginal effective tax rates, which take account of the withdrawal of benefits as well as explicit direct taxes.
The incentive to work longer hours is weakened by relatively high
marginal effective tax rates, with large effects on workers with relatively high labour supply elasticity, such as second earners (Table 4.
Continue to reduce average and
marginal effective tax rates on second earners.
Alternatively, the
marginal effective tax rate can be expressed as a percentage either of the pre-tax or after-tax cost of capital.
2008), "Still High:
Marginal Effective Tax Rates on Low-Income Families", C.
The chief methodology for applying this conceptual approach has been the King-Fullerton framework for comparing
marginal effective tax rates for different types of assets in different countries.
Budget room for extra expenditure on care subsidies and cuts in
marginal effective tax rates could be made by phasing out tax subsidies on owner-occupied housing
Foregone tax revenues are boosted by the fact that families with below-average income face a 70%
marginal effective tax rate because of withdrawal of child and working tax credits which counteracts the public savings on the childcare element of the working tax credit when a parent is on leave.
75 million households facing
marginal effective tax rates of 70% or more, although this is only around 11% of all working households.
Among this group of provinces, Alberta's low
marginal effective tax rate is directly associated with its low statutory income tax rate and the absence of capital and sales taxes; the other provinces achieve their apparent overall tax competitiveness by favouring slow-growth industries: manufacturing and forestry.
The effective tax rate on marginal costs is a summary measure that weights the effective tax rate on each input by the share of each input (14) in total costs; it is thus a function of the
marginal effective tax rate on each input.
Table 2 shows a 2005 ranking of all OECD countries and leading developing countries measured according to the
marginal effective tax rate on capital for large and medium-size corporations.
