An Effective Marginal Tax Rate (EMTR) measures the loss resulting from income taxation combined with the withdrawal of a cash transfer or welfare benefit, applied to earning an extra (marginal) dollar of income. EMTRs are a result of the interaction of tax and welfare systems. Specifically, a high EMTR is a consequence of:

- progressive personal income tax rates
- means tested, i.e. tapered/phased out cash welfare benefits
- means tested in-kind benefits such as childcare assistance.