Effective marginal tax rates matter both as a matter of incentives and of fairness. On
the former front, they may affect a person’s willingness to work, marry, and save. In
general, high effective marginal tax rates are thought to decrease the incentives to perform
an activity while low or negative effective marginal tax rates provide an incentive
to perform an activity (CBO, 2005). This can be seen in early work on the effects of
welfare, where steep benefi t reductions when a person started earning money typically