If a family earned an additional $6,000 of income from work and as a result their welfare benefits were reduced by $3,000, the implicit marginal tax rate for this family would be

Question

Quizplus · Accepted Answer

The implicit marginal tax rate for this family is calculated by dividing the reduction in welfare benefits by the increase in income. In this case, the reduction in welfare benefits is $3,000 and the increase in income is $6,000, so the implicit marginal tax rate is 50 percent ($3,000 divided by $6,000).

If a Family Earned an Additional $6,000 of Income from Work