The implicit marginal tax rate is:
A) only the amount of additional taxes paid on an additional dollar of income.
B) a supplement on the earnings of low-income workers.
C) the amount of additional taxes paid and benefits that are forgone on an additional dollar of income.
D) used to evaluate the economic efficiency of antipoverty programs.

Question

Quizplus · Accepted Answer

The implicit marginal tax rate includes both the additional taxes paid and the benefits forgone (such as welfare benefits reduced or lost) as income increases, which affects individuals' net income from earning an additional dollar.

The Implicit Marginal Tax Rate Is