A decrease in the marginal tax rate,with the average tax rate held constant,will

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When the marginal tax rate decreases, workers get to keep more of each additional dollar they earn, which will increase their incentive to work more. As a result, the amount of labor supplied at any real wage will increase. This is because the real wage at which a worker is willing to supply labor has not changed, so when the after-tax wage increases due to lower marginal tax rate, they will supply more labor at the given real wage. However, this assumes that the average tax rate is held constant; if the average tax rate were to increase along with the decrease in the marginal tax rate, the effect on labor supply would be more complex or possibly ambiguous.

A Decrease in the Marginal Tax Rate,with the Average Tax