Effective marginal tax rate
Encyclopedia
The effective marginal tax rate (EMTR) is the combined effect on a person's earnings of income tax
and the withdrawal of means test
ing of state
welfare benefits. The EMTR is the percentage of an extra unit of income (extra dollar, euro, yen etc.) that the recipient keeps after income tax is removed and after any decline in 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.
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
and the withdrawal of means test
Means test
A means test is a determination of whether an individual or family is eligible for help from the government.- Canada :In Canada means tests are used for student finance , and "welfare" . They are not generally used for primary education and secondary education which are tax-funded...
ing of state
State (polity)
A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
welfare benefits. The EMTR is the percentage of an extra unit of income (extra dollar, euro, yen etc.) that the recipient keeps after income tax is removed and after any decline in 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.
External references
- http://melbourneinstitute.com/publications/reports/WebReport.pdf
- http://www.amp.com.au/group/3column/0,2449,CH34906%255FNI155234%255FSI3,00.html