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Marginal Tax Rates Create Low Reward Zones for Low Income Workers

Created on January 7, 2013

Marginal Tax Rates Create Low Reward Zones for Low Income Workers

“Low-reward” zone

“No-reward”zone

MARGINAL TAX RATE FOR SINGLE PARENT WITH ONE CHILD IN 2012

EARNINGS

Low-income earners looking to work their way out of poverty may face a stretch—a “low-reward” zone—in which they can keep only a small share of their new earnings. As shown in the scenario below, a single parent earning $10,000 to $23,000 would pay marginal tax rates from 66 percent to 95 percent.

Note: Figures include transfer programs.

 

 

Source: Congressional Budget Office, Effective Marginal Tax Rates for Low- and Moderate-Income Workers, November 2012, http://www.cbo.gov/sites/default/files/cbofiles/attachments/11-15-2012-MarginalTaxRates.pdf (accessed January 7, 2013).

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