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Do higher marginal tax rates generally reduce the incentive to work?

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Marginal tax rates--which are the rates that taxpayers pay on the next dollar of income they earn--reduce the incentive to work because they reduce the financial rewards of working. Economists broadly agree on this fact but disagree over the strength of the effect. Even prominent liberal economist Paul Krugman has written, "Any income tax system will tax away part of the gain an individual gets by moving up the income scale, reducing the incentive to earn more."

DocumentationEconomic Effects of Taxes



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