Means‐tested benefits and progressive tax measures are intended to support low‐income working families, but they often create high effective marginal tax rates (MTRs). Low‐wage workers who increase the number of hours at work or accept raises may find that increased earnings are partially, fully, or more than offset by decreased benefits or increased tax liability. Using longitudinal ethnographic data from 40 families, this study shows how families learn about, view, and respond to high implicit rates of taxation. Contrary to the rhetoric of welfare reform, high MTRs diminish families’ opportunities for upward mobility and control over their lives through work.