Calculation of the effective marginal tax rate
per employee, which indicates how much tax increases and social benefits decrease when gross income rises by a unit of one, will identify a poverty trap.
Weighted averages of marginal tax rates
are computed by using Tax-Calculator, an open-source microsimulation model of the internal revenue code, and the 2011 IRS Public Use File.
In conclusion, increasing the lowest marginal tax rate
and reducing the lower income bound of the highest tax bracket increases individual income tax revenues as a percentage of GDP.
Transitioning from one tax bracket to the next by earning more income results in a greater marginal tax rate
, but not one greater than 100% since only this additional income is taxed at the higher rate.
There exists a large body of theoretical and empirical work on the effects of average and marginal tax rates
on entrepreneurship (or self-employment), but the literature remains inconclusive.
The aim of this sub-section is to model the relationship between the marginal tax rate
and the revenues it generates, and to derive a tax rate that would maximize this revenue within the countries group under investigation.
This analysis varied the square footage of the home office, the total cost of the residence, and the marginal tax rate
. The Tier I, II, and III indirect expenses were computed using the percentages shown in Exhibit 3.
In September 2012, seven weeks before the presidential election-one in which top marginal tax rates
were a major policy difference between the two major-party candidates--the Congressional Research Service (CRS) published a paper (Hungerford 2012) suggesting that there is no empirical evidence that top marginal tax rates
* 23.8% (20% + 3.8%) for taxpayers with a marginal tax rate
In addition, the study illustrates that the relationship between marginal tax rates
and the tax benefits of deferral is complex.
Both of these tax rates are much lower than the 35 percent highest marginal tax rate
in the tax code that year.
A decrease in the marginal tax rate
that raised the after-tax share of income by 1 percent raised reported taxable income by 0.2 percent.