Estimates of Tax Rates in the Afdc Program

The marginal tax rate implicit in the Aid to Families with Dependent Children program is the rate at which payments to families decrease as their incomes increase. The rates depend on the provisions of the states' programs regarding the deductions from income which are permitted in calculating payments and the methods which are used to limit payments. The rates estimated here are those facing AFDC families on average at various levels of income. They reflect both these provisions of the states' programs and the number of families at each income level who benefit from these provisions. The rates on earnings and on unearned income are estimated for twentythree states using data collected by a survey of AFDC families in 1971. The estimated rates on earnings are low, rarely higher than 50 per cent. The estimated rates on unearned income are considerably higher, over 80 per cent in half of the states.