high effective EMTR
will push her to work more hours, rather than less,
In addition to analyzing the impact of the reform plan with respect to the change in the aggregate tax burden or the average tax burden for taxpayers at different incomes, it is also possible to estimate the change in the EMTR
on wage and capital income for individuals and on new corporate investment.
The analytical value of the EATR arises from its ability to indicate to the part of the corporate income that is being effectively cut by taxation, but, unlike EMTR
, the EATR indicates on the effective reduction of the net present value of a profitable, infra-marginal investment.
and EATR on corporate income are calculated based on the neoclassical investment theory and on actual and future tax law data.
Harmer updates calculations of EMTRs
and makes recommendations for reducing them.
While such policies induce less new participation than some other policy options, particularly Earned Income Tax Credits, they do not increase anybody's EMTR
(as many of the other policy options considered do) and the additional work effort they induce from those already in work more than compensates to produce the highest aggregate labour supply response.
10) In contrast, the EMTRs
fall to less than 40 per cent at around C$45 000, and the same family would face an EMTR
of around 45 per cent on income of C$100 000.
Prior to the introduction of back-to-work bonuses, this group faced EMTRs
of 100 per cent after the first 6 [pounds sterling].
If the taxpayer contributes $10 of that $100 to charity and claims an itemized deduction for the contribution, then the EMTR
on the additional $100 in income is not 25 percent, but rather 22.
For the different measures of effectives tax corporate tax rates (ETR, EMTR
, and collection-to-GDP ratio), see footnotes 86-96 infra and accompanying discussion.
32) It is possible for families with two or more children to be simultaneously receiving Family Support and paying the top rate of income tax, at which point they will face an EMTR
of 63 per cent (composed of a 33 per cent income tax rate and 30 per cent benefit abatement rate).
includes not only marginal rates from the fiscal and social security systems but also has foregone opportunities for different forms of income and social support.