Lower marginal tax rates in welfare programs will increase the incentive to work.

Question

Quizplus · Accepted Answer

When marginal tax rates are lower, individuals get to keep more of their earnings as they earn more. This increases the incentive to work more since there is a greater expected return on their effort. When marginal tax rates are too high, individuals may find it less attractive to work since they may need to pay a large portion of their earnings in taxes, reducing the incentive to work more. Therefore, lower marginal tax rates can have positive effects on increasing the incentive to work.

Lower Marginal Tax Rates in Welfare Programs Will Increase the Incentive