An Analysis of Effective Marginal Tax Rates in Quebec

CIRPEE Working Paper 07-46

42 Pages Posted: 14 Dec 2007

See all articles by Jean-Yves Duclos

Jean-Yves Duclos

Laval University; IZA Institute of Labor Economics

Bernard Fortin

Université Laval - Département d'Économique; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Andree-Anne Fournier

Analysis Group, Inc.

Date Written: December 1, 2007

Abstract

This article draws up a portrait of effective marginal tax rates (EMTRs) on labour income in Quebec. It aims at allowing a better understanding of the impact of tax policy on the behavior of economic agents. Using an accounting microsimulation model that reproduces the system of taxes and transfers in 2002 Quebec, we measure the EMTRs that result from the interaction of the mechanisms of income taxation and redistribution. Moreover, we evaluate the distribution of EMTRs in the population. The analysis of EMTRs shows, inter alia, that family policy, whose assistance is targeted towards low-income families, generates high levels of EMTRs ascribable to the generally fast reduction of transfers as income increases. More than a quarter of heads of single-parent households face an EMTR which can reach, and even exceed, 80%. As for the two-parent families, they mostly face EMTRs of around 50%. We show the importance of accounting for EMTR heterogeneity, both with respect to types of families and levels of incomes, as well as evaluating the variability of EMTRs in the population.

Keywords: Effective tax rates, taxation, microsimulation, family policy

JEL Classification: D31, D63, H21, H24, I38

Suggested Citation

Duclos, Jean-Yves and Fortin, Bernard and Fournier, Andree-Anne, An Analysis of Effective Marginal Tax Rates in Quebec (December 1, 2007). CIRPEE Working Paper 07-46, Available at SSRN: https://ssrn.com/abstract=1071081 or http://dx.doi.org/10.2139/ssrn.1071081

Jean-Yves Duclos (Contact Author)

Laval University ( email )

Quebec G1K 7P4
Canada
418-656-7096 (Phone)
418-656-9727 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Bernard Fortin

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada
418-656-5678 (Phone)
418-656-7798 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Andree-Anne Fournier

Analysis Group, Inc. ( email )

1080 Beaver Hall Hill
Suite 1810
Montreal, Quebec H2Z 1S8
Canada

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