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Effective marginal tax rate
The effective marginal tax rate is the tax rate on each extra £1 of income – it takes into account the impact of direct taxes (such as income tax) but also the possible withdrawal of means-tested welfare benefits if people take a paid job. A high effective marginal tax rate is a root cause of the unemployment trap, it creates disincentives to find work.
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Fiscal Policy - The Laffer Curve
Study Notes
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UK Economy - Policy Focus - Work Incentives
Topic Videos
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The Unemployment Trap
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Marginal decisions in economics
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Taxes and Work Incentives MCQ Revision Question (Labour Markets)
Practice Exam Questions