Research Report Marginal Effective Tax Rate
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From The Encyclopedia of Taxation and Tax Policy
Don Fullerton
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The marginal effective tax rate, designed to measure incentives for investment, is a calculation that takes into account effects of measurement and timing of income in determining the impact of a tax applied to an additional dollar of capital income. The marginal effective tax rate on capital income is the expected pretax rate of return minus the expected after-tax rate of return on a new marginal investment, divided by the pretax rate of return.
Research Areas Economic mobility and inequality Taxes and budgets
Tags Individual taxes Taxes and business Federal budget and economy Income and wealth distribution
Policy Centers Income and Benefits Policy Center