Effective marginal tax rates for low-income families vary greatly depending on
income level, state of residence, earning patterns, and program participation. Previous
analyses of marginal tax rates tend to focus exclusively on taxes or transfers in a limited
set of states or ignoring state programs altogether. Using Urban Institute’s NICC, we calculate effective marginal tax rates for single parents and married couples with two
children, assuming earnings are distributed evenly throughout the year in every state
and the District of Columbia. These rates are likely exaggerated, as they assume people
participate in both TANF and food stamps and assume that people earn income evenly
in all 12 months of the year. We perform a second set of calculations that shows the
impact of working half the year for the same total earnings, and being unemployed the
remainder of the year. These lower effective marginal tax rates may well be the rates
people face, as having low-income is often a function of working only part year. We
invite users to test even more variations than we have covered in this analysis.