Trading on margin

[Shanemex]

I'm relatively new to investing and I am trying to understand trading on margin. It seems like the idea is pretty simple concept, where you borrow against your securities in order to buy more, which has the effect of magnifying gains and losses. I was looking at the margin rates that my broker charges, and saw that for debit balances of $500,000 or more they charge you 6%, but it is much more for balances of less than $500,000.

Now from what I've heard, the average growth in the stock market over a large number of years is around 8 or 9%. So if the market grows at 8% on average, and you can borrow at 6%, is there any mathematical reason that you wouldn't want to be borrowing as much as you could on margin? It would effectively be like getting a 10% return. Obviously there will be some bad years where you will really get hurt, but if the market has had an average yearly return of 8 or more percent over 50 years then those bad years will be averaged out, right?

Besides increased volatility, are there any other drawbacks to trading on margin? Does it have any effect on taxes, for either short or long-term capital gains/losses?