We analyze effective marginal tax rates for sample families using NICC, which allows
users to input wage and hour parameters to produce monthly incomes for sample families.
We look at effective marginal tax rates, by state, for two family types –– a single
parent with one child and a single parent with two children.4 We highlight families
with children as they are much more affected by high effective marginal tax rates than
families without children, since many tax credits and transfers provide larger benefits
to families with children. Families that participate in transfer programs typically face
higher effective marginal tax rates than families that do not participate –– though that
does not mean that families who do not participate are better off. It simply means that
as families who do not participate in transfer programs increase their earnings, they
gain more from their additional earnings, typically because they are not losing as many
transfer program benefits.